This Children’s Day give your child the gift of financial literacy

As a parent wanting the best for your child isn’t limited to giving them the best toys, the most fashionable clothes, or expensive gadgets. Yes, creating a cocoon of materialistic comforts for your child to the best of your abilities is important, but equipping them with life skills tops the list. Imparting money lessons is crucial when laying the foundation stone for your child to become a well-rounded adult.

It is common knowledge that our education system lays inadequate emphasis on making children develop a working knowledge of money. The initiation into the gamut of money management mostly happens in early adult life and the journey is often marked with a spate of hits and trials.

Parents taking early steps to make their children financially literate can save them from a lot of these painful experiments later in life. By making children privy to the fact that money is intimately involved in our day-to-day lives and overall well-being, parents can play a key role in shaping their children’s attitudes towards money. This Children’s Day, here are a few ways in which you can introduce your child to the world of financial literacy.

Starting at an early age

The earlier a child’s financial education process starts the better. This is because as they grow older, as parents and guardians, you would have the opportunity to teach your children age-appropriate money lessons. This approach is better than waiting for them to hit adolescence and then trying to teach them money management in a few years. By that time, chances are they would already have developed perceptions about how money affects their lives, and those notions can even be fallacious ones. If you are in a dilemma as to how you can start talking to your young children about money, simply introducing them to coins and cash can be a good first step. You can let them see you make purchases to explain to them how money works.

Yes, they can earn money too

A fundamental element of our relationship with money throughout our lives revolves around the way we value money. This perceived value has a bearing on how we manage financial resources and ultimately on our future. Teaching children that money has to be earned can be a judicious way to acquaint them with the fact that money is a finite resource, and it will also help them develop the acumen to avoid wastage. As a parent, you can consider giving them a small allowance in return for their participation in some chores or tasks. You should also tell them that should they require extra funds, they would have to take on additional duties. This way they will be able to value money better and even learn accountability.

Nudging them to save

For all children, the first ideations about money revolve around spending. They identify money as a resource by seeing their parents and family members buy things for them and the concept of saving only dawns on them in their late teens or early adulthood. Thus, teaching them the importance of saving from a tender age can help them develop prudence with money early on. Encouraging them to develop the habit of saving is also a great way to instill discipline and delayed gratification. You can help them save by setting a goal for them and creating a piggy bank or a jar where they can keep their savings. If you have older children, you can even teach them to operate bank accounts and manage a savings account.

Introducing them to budgeting

Once children become familiar with the habit of saving, the next step is to teach them to live within a budget. As a parent, you can start by making them privy to conversations when the family budget is being drafted. Thereafter you can sit with your child and help them come up with a budget of their own. Budgeting is the cornerstone of any financial plan and making kids develop their budget will help them develop a sense of ownership over their money and also imbibe confidence in managing money. The other benefit of learning how to budget is that it would foster in them the ability to differentiate between needs and wants.

I for investing

A financial literacy plan cannot be complete without touching upon the chapter on investing. As a parent, you should pass on the knowledge that saving and budgeting are not the end goals and in order to build wealth, they will have to learn to invest money. Educational content in the form of age-appropriate books, videos, stories or even movies can be a fun way to start the conversation around investing. Once your children grasp the basics of investing and you feel confident that the time is right, you can start involving them in family conversations about investing especially the ones involving their future. You can also handhold them and let them take baby steps in the world of investments by showing them how to invest in mutual funds through small amounts in the form of SIPs.

Practice financial hygiene and discipline

No amount of financial literacy lessons for your children can have a positive impact if you, as a parent aren’t practicing good financial habits in your day-to-day lives. Children have highly impressionable minds and their perceptions are heavily influenced by the people closest to them. So if you are talking to them about the importance of saving and find yourself complaining about unnecessary expenses at the end of the month, you are setting the wrong example. For your child to have good money habits, it is imperative that parents practice what they preach and are mindful of the ways they handle money when they are around children.