As per various researches done, most children’s financial habits are formed by the age of seven; hence, parents should not underestimate the effect their own good (and bad) money habits will have on their children. Teaching your children financial responsibility is one of the best inheritances you can provide them with. Let’s see how a concerned parent can pass on smart financial lessons from an early age.
Cash & Credit
Wherever possible, make payment using Cash. Let the child see / feel that the money goes out of their hands when they spend / buy anything. Making payments through cards / cheques will be little abstract for the child to understand. The concept of credit, credit card, banking, interest etc. can be introduced to a teenager.
Planning and Budget
While going for grocery shopping, it is advisable that we go with a list. This shows the child the importance of planning ahead and shopping systematically” rather than “just grabbing things off the shelf. Another approach is to show them a copy of your family monthly budget, with line items, you don’t have to get into the specifics of every rupee, but this kind of big picture gives your child an idea of budget and expenditure.
Four Slots
In the initial stage, one may start with one slot Piggy Bank to develop saving habit in the child. But, gradually, a see-through piggy bank with four slots: Save, Spend, Donate, and Invest – may be designed. This way they shall learn that money isn’t just for buying things.
You can advise your child on how to divide things a certain way or allow them to make their own decisions. Either way they will learn a lot about financial planning and dealing.
Allowances
Develop a system of giving daily / weekly pocket money to your child and ensure it is consistently followed. If parents forget to pay the allowance, children learn that money promises can be broken.
Games
Especially for younger children, board games can teach the fundamentals of investing in a practical manner. Think of games like Monopoly and Life. Here, kids get to learn how to spend a finite amount of money and make it grow. There are various age-specific money games, videos, etc. on internet for kids that teach them about money.