Teaching kids’ money management skills starts as a parent’s responsibility. It’s important for parents to teach kids about money management at an early age. Kids learn from their parents just by watching their shopping patterns or behaviour. A child’s attitude towards spending is largely influenced by how parents deal with regular money matters, larger finances and general savings. Introducing kids to money management at an early age, helps prepare them for the future. Click here to know more on how to prepare kids for the future.
Starting with simple tasks always helps to ease children into money management. For example, young children are made to count money for small purchases. Secondly, older kids can be made to walk to a nearby store with a small list for common groceries. Small tasks like these teach the kids to help the family and learn about money at the same time. Here are 5 ways in which parents can impart good financial management skills to young children
1. Explain how the ATM works
Most often when children accompany their parents to the ATM, they think that money just comes out after pressing a few buttons. Young children believe that the ATM prints money and its supply is unlimited. It is therefore important to let kids know that the ATM is just a safe for storing money. Let them know the money comes from a bank account where a monthly salary gets deposited. Explain to them that the money represents long hours of hard work.
Another discipline to inculcate in children is time management, click here to read on 5 ways to build time management in children https://www.learnercircle.in/post/5-ways-to-develop-time-management-skills-in-children.
2. Follow a budget
Make a budget for the family and let the kids be aware of the budget. For example, if you have a budget for toys or books that concern the kids, let them be aware of it. This way, they will realize that there are some boundaries on spending. An easier way to follow a budget is to break it down into 5 steps:
Track expenses and income for one month
Set short-term and long-term financial goals
Cut certain areas or expenses to suit more important goals
Over time the budget can be adjusted
Add a timeline for a review for the budget
3. Delay gratification
It is not necessary to buy things the moment a desire is expressed. By delaying the purchase of something, kids learn that gratification cannot be instant. It teaches them to be patient when they want something. They will also realise that it is not possible to buy things the moment they want them. Parents can delay gratification by encouraging kids to reflect on whether the purchase is necessary or not.
A part of parenting is to give children their space to make mistakes, reflect and grow. As parents it is impossible to protect children all the time or to make them happy all the time. Click here to understand more about helicopter parenting.
4. Curb impulsive buying
A good way to curb impulsive buying is to make a shopping list before going out on a shopping trip. The budget will also help here. Create a budget keeping in mind the short-term goals of the kids like stickers, glitter pens or books. A budget for long-term goals will also help to keep things in perspective. Encourage the kids to have a waiting period before spending a certain amount. The period can range from 24 hours to 30 days.
Before a kid can make a purchase ask a series of questions. For example, “is this important at this point?’’ “Will you use it carefully?” Try to avoid window-shopping with kids in tow.
Do not encourage kids to shop online. Discourage emotional shopping. If your kid is having a bad day, don’t use a shopping trip to cheer them up.
Educating kids at a young age reduces the effects of impulsive buying and it can help them to overcome shopping temptations as they grow.
5. Encourage saving
One of the key financial management skills is learning to save. You can encourage your kid to save by the following methods:
Cajole the kids into using a piggy bank
Keep a future purchase in mind as a goal towards saving
Consider setting up a saving account in the kids’ name
Parents can show kids when they try to save money in some way
Children must be praised when they try to save
Share stories about savings and expenditure with the kids
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