We live in a materialistic and consumerist world. When parents themselves have little control over their spending habits, it is not easy to teach children the importance of money and its responsibility. Our experiences and thought processes as we grow up play an important role in how we manage our finances. So it makes sense to teach kids good financial habits from the start. Here are some ways to instill financial discipline in your child.
Introduce the concept of budgeting / accounting
For every penny you give them as an allowance, have your child keep track of how they spent it or where they plan to spend it. Such habits greatly help them manage their finances later in life.
Encourage children to use cash for small purchases
With plastic money and digital payment apps becoming convenient ways to shop, kids are not aware of the actual money transaction. Allow them to use the money when you visit a store to purchase chocolates, juice, and other small items. They will then realize the concept of exchanging money for goods or services.
Make them understand the price differences
When shopping in a supermarket with your kids, get two similar chocolates – one more expensive and one less expensive. Explain that to buy the most expensive, they need to save on their allowance.
Define the rules
Nowadays, many parents have the habit of abusing their children too much by giving in to all their demands. It is essential to make your child understand the difference between needs and wants of value for money. If a child insists on something that is a “desire,” get the child to contribute pocket money to it. For example, your daughter wants the latest Barbie set. Instead of agreeing to buy the doll instantly, make a plan with her as to how long she would need to save on her spending money to buy it. Buying the toy with his own money will give him a feeling of satisfaction and teach him the habit of saving.
Instill financial independence
It might be a good idea to open a bank account for the kids. This will help them understand the value of the gifts they would have received from their loved ones. Children should also learn to periodically check their bank accounts and see how the amount increases with interest. This will instill the habit of saving and spending wisely from an early age.
Lead by example
The adage “the apple doesn’t fall far from the tree” holds true when teaching your child about finance. You are the role model for your child. Watch your spending behavior in front of them because they will understand what you are doing. If you are mindful of your purchases and responsible for your money, they will learn the same from you.
Keep these tips in mind to build a solid foundation for your kids to develop healthy financial habits. By giving them a head start, they will become responsible and wise adults.
This is a partnership publication
First publication: STI