Do you think you shouldn't talk about money with your children? You are wrong if you've answered yes. It is of utmost importance that the children should know how to manage money, right from young age. This can help them avoid falling into debt problems in future. Read on to know how you can teach your children how to manage personal finance.
1. Introduce your kids to money - You should introduce the topic âmoney' to your children at young age. You should provide them with enough information so that they start understanding what money is and in what way money can help them in life. Children learn fast when you repeat a thing and they also observe it. So, frequently talk to your children about managing personal finance and show them how you're doing it.
2. Explain the difference between needs and wants - The difference between needs and wants should be taught to the children right from young age. They should learn that they cannot get anything and everything what they want if they aren't necessary items. When they ask for a number of items, you can tell your children to select one item which they want to buy or tell the amount within which they need to purchase. In this way, you can teach them how to make good spending decisions.
3. Clarify spending versus saving - Explain to your child that his/her money will grow if he/she saves a potion of his/her pocket money instead of spending it. It is advisable that you pay an interest on the amount he/she has saved. This will help the child to understand how he/she can increase savings by not spending much.
4. Gift piggy banks to your child - Instead of gifting one piggy bank to your child, why don't you try gifting 3 piggy banks? By doing so, you can introduce them to the concept of saving, spending and donating. Ask your child to deposit money into these 3 piggy banks - one from where he/she can spend when required, the other one is just for the purpose of saving and money cannot be withdrawn, and the third one is for donating. This will help your kid to learn how to manage finance and allocate money into different categories.
5. Open a savings account for your child - Introduce the concept of savings account to your child by opening one. Ask him/her to deposit a certain amount of his/her pocket money into the savings account but don't restrict him/her to withdraw from it when he/she wants to buy something.
6. Have family discussions on managing finances - It is advisable that you have family discussions on how to manage money, at regular intervals. The topics of discussions should revolve around good spending habits, difference between checks and cash, how to manage credit cards, etc. If your child is a teenager, then you should also discuss about the current economic scenario and how personal finance should be managed at that point of time.
7. Guide kids to assess advertisements - Children are much more attracted towards advertisements; so, guide them how to assess advertisements while buying products. When your children become teenager, involve them in making important financial decisions. Ask them to put forward what they think and explain why you think it's right or wrong. You should also discuss how each member should work together towards following the family budget.
Some of the schools are coming up which include personal finance education as an important part of their school curriculum. You can get your child admitted to such a school which teaches money management skills. In this way, your child will be able to manage finances in his/her life, in a much better way.