You are the biggest influence on your children financial habits, even greater than financial courses. Teach them how it's done!
Teach your kids these money essentials to help them avoid your mistakes and live financially fit lives.
You May Have to Wait to Buy Things You Want
This is a tough concept for most adults, let alone kids. However, it should not prevent you from teaching it to them. Kids must be taught that if they really want something, they should wait and save to buy it. For instance, if your children go to a supermarket and ask you to buy a toy, you can remind them about the family vacation and the money you are saving for that. This way you can teach them how sometimes you have to say 'no' to things now to enjoy better things in the future.
You Need to Make Choices on How to Spend Money
It is important to tell your kids that money is finite and must be spent wisely. You must tell them that if they spend their money to buy something that they don't need, they won't be able to buy something that they need. For instance, buy them a different jam instead of their favourite one and tell them it was cheaper and tastes the same. Take them along with you for shopping and give them money to buy an item with certain attributes, to give them an experience of making choices with money.
You Need to Save Sooner to Grow Money Faster
As children grow, you must shift the idea of short-term savings to long-term savings. Educate them on opening a bank account and how compound interest can grow the money faster. Use simple examples like saving ₹ 1,000 every year will give you ₹ 250,000 on retirement, whereas if you start at 40 years of age, you will only have ₹ 40,000 on retirement. You can introduce them to a few websites to learn more about compound interest and help them in setting their financial goals.
Work is Rewarding and Helps You to Earn Money
Show your kids that hard work is rewarded. Whether it's chocolates, food, toys or real money, grab their attention to involve them in a task and then reward them with any of these, based on their preferences. You can start with simple tasks like cleaning the bed to throwing waste in the dustbin and then move to complex tasks like getting good grades in school to being punctual, as they grow up. Monetary rewards will motivate them to stay focussed on the task and finish it on time.
Use a Credit Card Only If You Pay Bills Timely
Swiping a credit card and spending beyond your means is all too easy, but paying off the debt on time is not. As parents, you need to put a check on your kids' habit of spending beyond means and burdening their finances. A bad credit history can make it difficult for your kids to get loans for education, home, or car in the future. It is good to look for a card with low interest rates and no annual charges or better to avoid it unless they cannot pay the bills every month.
Studies have shown that children as young as three years can grasp financial concepts and most of their spending habits are formed by the age of seven. Therefore, the sooner you start the better it is!