As parents we adore our kids and want the best for them in all aspects of life. Be it education, clothes, food, entertainment or gadgets, we don't hesitate to go the extra mile.
We all strive to teach our children the right set of morality, values, ethics, culture, language, and good behavior, beyond the external things. The skill of managing their finances is perhaps one of the most important thing that impacts whether they will do well or not in life.
Sadly, our education system and even parents don't often focus on teaching children good money and investment habits. That's a big mistake because money is important in our day-to-day lives. In fact, money is at the heart of every choice we make in life—where we live, what we eat, the clothes we wear and the car we drive to name just a few things. It's just as important when it comes to gifting, entertainment, ceremonies and other social occasions. Everything revolves around money.
Without good money habits, children may grow up to be ill-equipped to make the right financial decisions and follow the expected behaviour. As adults, they may end up overspending and under-saving and making all kinds of wrong decisions. Giving money to someone who isn't ready to handle it is like pouring water into a leaky bucket. Our priority as parents should be to teach our children to be financially responsible.
Raising children to be good with money doesn't always come easily. Some parents are uncomfortable discussing financial matters in front of their kids. Others think that kids are too young to understand money, or that bringing up the topic will only complicate things for them later on. In some Indian households, this tradition has continued; parents see discussions about money as unnecessary or inappropriate, and have never felt comfortable talking about it around children. This can lead to problems later on-things like anxiety and lack of autonomy when it comes to managing any kind of savings plan. However, if you talk to your kids about finances from a young age while providing clear guidance, they'll be set up well for life. If you're an educated investor and knowledgeable about good money behaviour, there's nothing standing in your way of raising financially literate children. Remember, Warren Buffett, started investing from the age of 11 years and he thinks that he started late and this was in the 1940s!
Now is the time to break this stereotype and remove all taboos around money. Money may not be the most important thing, but it is a necessary part of life. Some people worry about how their kids will feel about money matters when they grow up, but there are some good ways to teach them about money. If you involve your kids in day-to-day money matters from an early age, they will become more responsible with their finances later in life. Financial management skills can't be taught overnight, so kids start learning them from a young age by observing what others do and listening to stories about finances. Teachers and family members need to emphasize the importance of understanding money for children and help build a strong understanding of financials early on.
Here are some tips for teaching your children good money habits and financial prudence.
Talk about Money.
You may feel uncomfortable talking to your children about money-related topics, but avoiding the topic could mean that they don't understand it as adults. As a parent, you can share your own experience, good and bad. You can talk about mistakes you've made for them to learn from and about skills that will help them be successful now and in the future. Even if you don't know much about personal finance, encourage your child to educate themselves on money matters suitable to their age level.
Teach how to Budget and Save.
Kids often demand a lot of things without caring if their parents can afford them. They get angry or sad when you do not fulfil their demands. To stop this, make sure to teach them how to save and budget money. You can share some regular pocket money with them but add an additional sum around events. Let them make hard choices by prioritising their spending and managing cashflow themselves. Ask them to maintain a proper record so they can learn how things work and realize the importance of pre-planning for bigger rewards in the future.
Let them earn through challenges.
When children earn money on their own, they learn how to be self-sufficient and independent. So, assign certain tasks to your children like cleaning their room, getting good grades, reading a book, making a presentation, any creative assignment, etc. and on successful attainment give them commensurate rewards which can be in form of things they need in a budget or some extra money in the piggy bank. This will enable children to not just learn and be responsible but also value hard work and the rewards earned.
Let them experience Investing.
Teaching your kids about the power of saving money is a great idea. However, one way to give them the experience of building wealth is to introduce them to investing at an early age. You can set up and manage small investments in different assets and let your child track their progress. Let them also search for and find investment opportunities, so they have the opportunity to invest their own money. This early exposure to various assets, and the learning and experience from early, formative years can be life-changing for them. Mistakes done at this age are welcome as they will make sure that they avoid them in future. By good luck, some decent money may be put aside before they even get a job!
The Bottom Line:
Today, being financially prudent has become increasingly necessary in an era where raising financially responsible children is the need of the hour. Your role as a parent should be to raise smart, grounded, experienced and knowledgeable kids who can navigate the complex financial mazes of life. Kids of the appropriate age should start learning about personal finance now.