Parents want the best for their children and help them in every possible way to make them better individuals. While children receive formal education from academic institutes, the traditional education system teaches them almost nothing about money. Hence, the need to teach money lessons or help children form good money habits falls on the parents.
Here are some easy ways that will help kids inculcate good money habits:
Explain the difference between needs and wants
It is normal for kids to demand things. However, is it required to buy whatever they want? Absolutely not! Whenever your kid wants a particular thing, ask why it is needed. You can follow up with several questions and even point out alternatives they might already own. Explain the concept of needs and wants. This will help them cultivate good spending habits when they grow up.
Give them a budget
Instead of caving into their whims and fancies, give them a specific sum of money on a weekly or monthly basis. The allowance may vary from time to time. Give them incentives and rewards by increasing their allowances if they help around the house such as getting groceries or doing other chores. This will help them understand the value of money. The value of money is one of the most important lessons that are going to stay with them for life. The key is to make children realise that everything comes with a price and they need to plan and work for it.
Cultivate the habit of saving
In the age of instant gratification, cultivating the habit of savings habits has become the need of the hour. You can also give piggy banks to kids so that they can add their pocket money or the money that they have received as gifts from relatives.
Gift them a clear glass piggy bank. The amount of money visible through a glass piggy bank will encourage your child to save more. It will help them prioritise their financial goals over other things. If they have multiple financial goals, you can give them more piggy banks. You can also buy mason jars and ask them to label them with their goals.
Track their savings and spendings
Helping your child to track their savings and spending will result in good money habits as an adult. Before they begin their savings journey, tell them to keep a note of the amount that they are saving in a diary. Once they achieve the required amount, they can open or break their piggy bank.
Also, motivate them to keep a tab on their spending. This will help your kid to keep a track of their pocket money or save more if they wish to.
Include your child in money conversations
Many parents make the mistake of leaving children out of critical money conversations. Include your children when you are drafting the monthly budget or planning to invest. This will make them familiar with the different aspects of money management. Also, take your children when you meet your financial advisor. They may not understand most of the things, but kids absorb and it helps them build a perspective.
Be a role model
Kids learn a lot by observing elders. Hence, it is important to become a financial role model for your kids to follow. While parents must make their children understand the value of money, parents should be mindful of the way they are spending money, where they are spending, and how much are they saving or investing per month.
Habits cultivated at a young age have a long-lasting impact. Money habits are no different. With the lack of financial education, parents and elders need to help their children form good money habits.
(Viral Bhatt is the Founder of Money Mantra — a personal finance solutions firm)
