Teaching Kids To Be Money-wise
Children need to be introduced to the concept of saving, spending, and sharing, perhaps by dividing their allowance into these categories
Over 70 per cent of Indian youth are living paycheck to paycheck. In times of recessionary fears and the looming threat of job losses, the importance of being prepared to manage personal finances has never been more evident, according to a study by Aviva India, an insurance company. Here’s how you can equip your child to start becoming financially savvy through their formative years.
Earned Allowance
Giving your child monthly pocket money is a great start to introducing them to the world of financial planning. Says Abhishek Kumar, Founder, SahajMoney, a financial advisory firm,“Pocket money is a way to give children control on how they wish to spend or save the money. When used wisely it helps in making kids aware about how money management is beneficial to decide to spend or save which prepares them to manage money later on in their lives.” They learn to start budgeting and the differentiation between needs and wants.
Says Madhupam Krishna, Chief Business Officer, WealthWisher, a financial planning firm, “Pocket money may develop a lure of entitlement with kids. If given unconditionally, it may foster a sense of entitlement rather than appreciation for earning.” Tying the amount of pocket money to work such as helping in household chores, tidying up behind themselves, acts of kindness etc. helps them understand the work that needs to be put in to earn.
Bank Accounts and Debit Cards
To familiarise your child with the world of banking and help them understand interest rates, opening a savings account for them to which they have full access could be a great tool. Most banks and financial platforms also offer “kid” debit cards, giving your young ones the full spectrum of exposure and related responsibility to spending like an adult while giving you access to monitor where, what and how much your child is spending. Rewards linked to quizzes and videos on financial literacy, in-app tasks you can create for your child, among others add in a multitude of additional benefits your child is gaining through access to the banking system.
Saving and Investment Games
A game or activity is more likely to capture and retain a child’s attention than any knowledge you may try to give. By turning savings into a challenge or competition you can challenge your young ones to work toward saving up to a target or maximise their savings within a stipulated time frame.
Similarly, for slightly older children, platforms such as StockFuse or Wall Street Survivor provide virtual simulated trading platforms with multiple challenges pushing them to experiment with different investment instruments as well as expose them to different market conditions.
Involvement in Financial Discussions
Kids are highly susceptible to absorbing and imbibing what they hear around them in their formative years. Says Krishna, “Let kids observe how budgeting works, explaining how expenses like groceries, utilities, and entertainment are planned. Set an example by showing them how you track your spending and save for larger goals.”
Involving them in age-appropriate discussions about family finances, like budgeting for a family vacation or comparing prices while shopping could make them more financially conscious and aware from their early years itself.
While gearing up to a financially secure future for your child, these simple activities can help build a solid foundation in your children, setting them up to become financially mindful adults.
