Make your child ‘Money Smart’

Parents generally teach their child a lot about human values, etiquettes and manners at home. Even at school, teachers emphasize more on moral science and value education. But when it comes to money and finance, parents usually think that their little ones are too young for it.

However, money is a part and parcel of our lives, and just as there is good and bad behavior, there is good and bad financial conduct. Therefore, it is necessary that you educate your child with the basics of money and money management.

Good financial habits need to be inculcated from childhood.

Moreover, with the increasing number of facilities and products available in the market these days, like games, CDs, movies, dresses, cosmetics, etc, the demands of children are increasing and they are becoming spendthrift. Hence, it is important that they learn to appreciate the value of money.

Following are the 5 ways by which you can make your child ‘MONEY SMART’

1. Awareness about money

The first step is to make your child understand what money is. You need to explain your child the concept of money, earning, saving and spending of money.

Taking your child for daily shopping is a good way of making them aware of real life examples. Show them the products and their prices. As they grow, make them compare prices.

2. Monthly allowance

As the child grows up a bit and understands the concept of money, start giving him a monthly allowance. This will give them a real life experience about money and buying and selling.

One important thing that you must keep in mind is that rest the duty of spending and saving on your child entirely. By doing this, the child feels more interested and gets a feeling of responsibility.

Since the reason of the allowance is to teach financial discipline, do not give any extra allowance if he has exhausted it days before the next allowance is to be given. Similarly, on your part, pay the allowance on time. Do not delay or make them remind you.

3. Encourage saving

Always encourage your child to save some amount of his allowance. It will make savings more fun and motivated if you link it to his buying something big from the gathered amount say a bicycle, a doll set, playstation, cricket kit, etc.

4. Budgeting

Another important lesson to teach your child is budgeting. Since our needs and desires are always more than the resources, it is necessary that your child learns to prioritize the needs and expenses. To begin with, let them make a budget of the allowance they get. Let him make a list of what he wants and then decide what all is possible within the allowance.

With time, he will learn the art of budgeting and distinguish between his ‘wants’ and ‘needs’.

5. Investing

As your child grows, explain him the concept of investing and risks. Also, warn them against various kinds of common frauds.

6. Credit cards

When we pay through credit cards, children do not see any exchange of money and assume that one can buy free by using them. Therefore, it is necessary that you tell them the advantages and disadvantages of a credit card. Show them the credit card bill you receive at the end of the month. This will help them to understand the payment mechanism of a credit card.

7. Deal positively with peer pressure

This is a situation which every parent encounters. The child may want something his friend has or he may flaunt a thing which his friends won’t have and become arrogant. The parents need to handle both the situations with patience. The child needs to be explained the situation in detail and inculcated with right & positive behaviour.

8. Good financial behavior should be rewarded

You need to praise and applaud the child if he has been consistent in meeting the rules laid down for 'saving' and 'spending'.

9. Don’t exaggerate the money talk

No matter your child needs to learn about the basics of money, but make sure you don’t over do the money talk as it will make the child develop negative attitude about money.

Children are like wet cement, whatever falls upon them, leaves an impression. So start inculcating these basics of money in them and make them ‘MONEY SMART’. Good financial management attitude and skills will benefit the child throughout his life. It is one of the best gifts we can give them.