Source/Contribution by : NJ Publications
In today's times, people want to get the best of everything for their child, the best education, food, clothing and the best quality of life. They say kids of the Z generation are born with a silver spoon, since most often parents bestow them with all the luxuries of life, without having to worry about the means, kids are totally left out of the money talk. Kids of this generation may not have experienced the financial difficulties as the earlier generations did. Until adolescence, they believe that money is unlimited, since they have been getting whatever they have ever wanted, decorated on a plate. And then a bomb is dropped when they move out of the house and step into the savage Adult world. That's the time when you'd expect your kid to save and start investing for his/her future, but chances are he/she would be entrapped in the vicious circle of Monetary Negligence accompanied with ruthless spending, zero saving and high credit card debt. It would take some precious years of their age before realizing Financial Cognizance.
To avoid this situation, it becomes crucial for parents to inculcate financial prudence among kids from a young age. If they have a strong base built, they acknowledge money's worth, saving & investing will run in their blood. In this passage, we'll share with you ideas on how you can go about constructing this base.
Understanding the Role of Money: Kids should be able to connect the dots, that:
1. Things come for a price, the price is Money And
2. That the supply of money is limited, and that is the reason why out of the ten toys they demand, they get only two.
There are small things that you can do in your everyday lives, for making them conscious of money's worth.
For preschoolers, all that matters is a balloon or a toy, which probably they'd buy, but may hardly ever play with. As a parent it's important that you don't give in to their demands too quickly and also not always. When fulfillment of wants isn't easy, kids will learn to be patient and start valuing things.
When your kids accompany you to the ATM, they may be fascinated by how cash is dispensed, you must tell them it's not magic and that when money comes out, concurrently your bank balance is reducing.
Send them for small purchases like buying stationary, a packet of milk, popcorn in the cinema hall, so that they can sense the exchange between money and the stuff bought. They'll get to know the prices of various products and that some products are more valuable than others.
You can instill diligence in your kids by involving them in your routine affairs like checking restaurant bills, you can ask them to compare prices of the same product offered by different brands, while you go shopping for groceries.
Saving: They understand the connection between money and the goodies money can buy, but do they really understand the connection between money and bifurcation between the goodies and savings? Young kids must understand that you put in a lot of hard work and efforts to run the house. They should realize the value of thrift and savings, and should start taking their first steps of being financially savvy. Your role as a parent is to familiarize the kids with the need to save and guide them as to how to go the about the saving process.
Tell them Why to Save
Narrate to them instances that how your savings helped you achieve your goals, that your car, which your son loves to the core, came because you saved for it, or the recent vacation where your kids had a great time, happened because you saved for it throughout the year. Also narrate instances when your savings helped you in meeting emergencies, like when their favourite aunt got married, you bought all the beautiful clothes and gifts for the aunt from your savings. The idea is kids should realize that why should they save, before moving on to the saving activity.
Tell them How to Save
A small allowance for winning a competition, or helping out their mother in the kitchen, or for scoring well in exams, will not just motivate kids but will also help them understand the concept of working hard for money. Concurrently, they should also be explained that although they've earned the money, they shouldn't be spending it all, a portion must be saved. You can always attach a goal as a motivation to save, like buying a gadget or having a grand birthday bash next year from the accumulated savings.
Budgeting: A crucial element of valuing money is learning to live within a budget. You must tell them that you prepare monthly budgets and manage all the expenses within that budget, which helps you in saving money for your goals, that you could save for the annual family vacation because you lived within your budget. A great idea to have your kids have the hang of budgeting is through a simple activity like letting them plan a birthday party within a budget, while you monitor the progress by checking the expenses and the budget left, poke them if they are spending too much on an item and remind them of the budget left.
So, the bottom line is, kids must start learning to value money right from the time when they start learning the “basics” like learning to value our culture, respecting elders, being hygienic, being kind, among others. It's extremely important to expose them to money matters gradually from their early years. There are little things you can do, which can help them become money wise, to help them establish a connection between ends and means.