Management of finance is an important aspect of one’s life and as parents, you should make sure that your child starts learning about it from a very young age. Listed below are a few steps that you can take to teach ways of effective financial planning to your children.
1) Use the piggy bank method
It is perhaps the most interesting way by which your child learns about money management. There is no point in telling him about the usefulness of saving money, or about the ill-effects of overspending when he is too young, for instance 2 to 5 years old. Therefore, use the piggy bank. Give him a dollar or two each day and ask him to deposit it in the bank. As he is rewarded with a large sum of money at the end of the month or so, he automatically will be inclined towards saving more for the coming days. Therefore, the first lesson of financial planning, i.e., the “usefulness of saving” is learnt.
2) Set Financial Goals for him
As your child grows a little older, say 7 or 8 years old, start setting short-term financial goals for him. Continue giving him a certain amount of pocket money and ask him to save up for an expensive toy or a short holiday trip that he wants. In case of the holiday trip, you can ask him to save enough money so that he can sponsor the lunch at one of the most well-known restaurants of the place you are visiting. Setting short-term financial goals from a young age always helps. In this manner, your child is slowly prepared to set long-term financial goals (like higher education) and save money accordingly.
3) Show Them the Way
Only setting monetary goals and asking your child to work on them will not be sufficient. You have to guide him as well. For instance, if you are asking him to save up for a bicycle, keep dropping hints on how he can cut down on his expenses. Ask him to cover the way to school on foot (if he can) instead of taking a cab. He does not really have to live on abstinence. However, you can definitely advise him to cut down on his entertainment costs, or his expenses on food (keeping in view that it does not harm his health) until he buys the bicycle.
4) Prioritization of goals
When your child reaches his teen, you should gradually start teaching him about the importance of prioritizing his goals. He might have got whatever he wanted as a little child but now is the time to bring about a change in his thinking. In future, there will be times when he will have to make grave choices as far as fulfilling his own wishes are concerned, for instance between an expensive car and an equally exclusive holiday trip. Therefore, start preparing him for these types of situation in life. Advise him to spend wisely. Today, if he is given a choice between keeping aside some money for his higher education and spending the same amount for a short trip with friends, he should be able to judge which is more important for him.
5) Career Tips
As parents, you possibly can’t decide the career path to be chosen by your child. It will depend on his choice, talent, and his ability to make the most of the opportunities presented to him. All you can do in this case is motivate him to follow his dreams and make sure that he gets the right kind of training that is required to transform his dreams into reality. But it would be advisable if he understands that he should choose a career that is fulfilling (in terms of job satisfaction) and lucrative as well. Only saving up money for future will not do. He should earn sufficiently as well to invest in profitable schemes so that his savings are doubled or tripled.
Marie Nelson is a passionate blogger with expertise on financial matters. The global economic crisis has been the subject of most of her recent write-ups and at present, she is writing exclusively for United Finances.
It’s an age old parenting question, but one which still causes a huge amount of debate: should you give your child pocket money or allowance for doing chores?
The school day is relatively short, so it’s natural that some subjects will get less coverage than others. But the financial education of children has often been sorely lacking, with teachers leaving it up to parents to teach the fundamentals of how to save and spend safely. With the rocky economy we now find ourselves in, it is more important than ever that kids are taught how to be financially self-sufficient. Here are the three things we think they should be teaching about money in schools, and how you can help your kids in the meantime.
