4 Ways To Teach Your Kids Important Money Lessons

I am raised in a family where every single penny spent was carefully thought of. My parents always planned their expenses very well with writing down how and when they spent a big amount. Even on petty expenses, my mother was very watchful. Their hard earned savings were always mapped to our more important needs like education, treatment, marriage, etc. As I grew up seeing them, I understood the importance of savings and how it could be instrumental in fulfilling our dreams and aspirations. Thanks to my parent’s savings, I received a good education which landed me a well- paying job in a reputed company. That's why I feel every child should learn good money habits like saving,  careful plannings and executions from the very beginning of his/her life.

Given how important financial skills are to navigating life, it is surprising that our schools don’t teach kids about money. So as parents, it is our job to teach our kids these important financial lessons. I also feel, that my better half, my husband, is even more cautious about teaching our 3-year-old good money habits. Sometimes back, I noticed my husband telling a story to my son wherein a rabbit buys a bunch of carrots with giving 20 rupees to the shopkeeper. I was surprised why rabbit is giving money to the shopkeeper? It was 'ahead of time' thing for our 3-year-old, so I asked my husband about it. He explained me the importance of including this very line and then I realized that slowly he is preparing our son for good money habits. If the rabbit is buying carrots with giving money to the shopkeeper then it means we need to give money to shopkeepers for buying anything from the shop. And this is the introduction of buying selling in exchange for money. This way our  3-year-old clearly understands that money is important because it can buy things for us.My husband's next course of action in this line is to introduce our son to different currencies. And again he must be doing it some playful way so that our tiny tot can understand that.

Similarly, we can inculcate good money habits in our kids using stories and easy to understand examples. Here are some of the suggestions that we, husband-wife, are planning to follow in coming years for our son :

1. Age 3-5: You may have to wait to buy something you want, dear.

I know this is a hard concept to understand for people of all age groups. However, kids at this age need to learn that if they really want something, they should wait and save to buy it. Now what we parents can do to make our kids understand this lesson :

• Every time your kid receives money, whether from a relative or as a token of love from someone, divide the money equally among two piggy banks. Name these money banks as Saving and Spending respectively. Have him or her use the spending jar for small purchases, like candy or stickers. The saving jar should be for more expensive items. Decide this 'expensive item' with your kid.
• Every time your kid is adding money to the savings money bank, help him/her count up how much he/she already has, talk with him/her about how much he/she needs to reach her goal of buying the expensive item, and when he/he will reach it.

2. Age 6-12: You need to make careful choices about spending money, dear.

Money is finite and it is important for our kids to understand that once the saved money is spent, it doesn't come back or there is very less chance of spending more immediately. So, good money habit means making wise choices about expenses. What we parents can do to make our kids understand this lesson :

• For teaching good money habit to tween kids, let them join your monthly home budget planning. This way, they'll learn how to wisely divide money based on super important needs to good to haves.
• Give your kid some money, like 50 rupees in a supermarket and let him/her make choices about what fruit to buy. Observer the choices that your kid is making. Correct him/her if you see a scope of correction.

3. Age 13-16: With compound interest, we can get a little extra on our savings. So, save fast and regular.

This is the age bracket when we can introduce kids to the concept of compound interest and how one can earn interest both on present savings as well as on past interest from previous savings.What we parents can do to make our kids understand this lesson :

• Let your child set a longer-term goal for something more expensive than the toys he/she may have been saving. For example; buying a good watch rather than buying a packet of stickers every day.
• Use math's and let them calculate some of the real-life problems of achieving a target of bigger numbers.
• Allow them to do grocery shopping for the month and discuss with them their strategy of spending the given money.

4. Age: 17 +: Much more sensible thinking and execution

I feel, teaching good money habits to the kids of this age is little difficult because teens often strive for independence and don't realize the gravity of the money matters. However, with some careful thinking, this can also be achieved. 

• Open their bank accounts and encourage them to save money into their accounts every month. Give them independence to take charge of their bank accounts/ATMs/Pins. This can be a joint account with parents so that parents can also manage it when needed.
• Discuss how much you can contribute to your child’s education each year. This could be as simple as paying school and tuition fees. And this could be complex as an education loan and how repaying the loan should be planned.
• If you are okay with giving kids your credit card when they are out, then teach them that any late payment could also affect the parent’s credit history.

Teaching good money habits also means keep on stressing over good education since the very beginning. By the time our kids become teens, they should understand the value of a good education and the importance of hard work to their financial future. Their judgement about saving and spending money can go wrong at times. But as parents, it's our responsibility to prepare them for the "real world" which has to do a lot of bustle with money.

"Money is such an amazing teacher. What you choose to do with your money shows whether you are truly powerful or powerless." And saving money makes us powerful and financially independent in long run. Financial independence is not just about being liberated. It also brings happiness and lets us live life on our own terms. Thus I have started preparing my son for his future financial decisions, have you?

This blog I have written for the #effectiveparenting contest hosted by https://www.smartykidsparenting.com/ and https://financefundas.in/

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