Festivals are all year round, and we always plan them with enthusiasm. Why not think differently this year. You can help your young ones to develop knowledge and skills to handle finances.
Money is a necessary tool to live and survive in society. Managing finances is an art and an imperative one to learn. Many of us often ignore, sweep it under the carpet, or do not understand financial challenges.
But we certainly do not wish our kids to face the same when they are of our age. Equipping your children with the knowledge of money will make them face their financial challenges. It will also capacitate them to handle the circumstances in their life.
The smart financial choices in life
The ultimate job of a parent is to equip their child to survive the race of life. In any case, if you don’t, someone else or from somewhere will start learning, which might not be in their best interest.
For example, you can always divert them to a loan if they have financial issues.
But you also have to tell them the importance of repayment. You can help them get bad credit car financing if they wish to buy a car. This will help them in buying their car. Therefore, let’s discuss some of the ways and things to get you started.
Effective financial ways
As parents, it is your prerogative to teach your children the importance of finances. You can start with the following concepts.
- Spending and Saving
There isn’t any need to teach how to spend; kids pick it up on their own. On the other hand, saving is something that they can never learn on their own.
Teaching them to balance spending and saving is necessary. Create two jars/boxes and call them spending account and saving account.
Whatever money they get (pocket money, monetary gifts, etc.), make them divide and put the money in both boxes. Tell them that the savings jar is for making bigger and occasional purchases.
With time they can also be taught to vary the portions being put in the boxes, i.e., saving more when there are lesser expenses and vice-versa.
- Set spending goal
Like we do with our finances, we make goals and then walk towards them step by step. Teach them the same.
Set purchase goals for them, ask them what they wish to purchase, and help them with the money required and how much would be required to save, and in how much time. This will teach them to plan and follow it in the time frame in order to achieve the goal.
- Short-term vs. Long-term goals
Another critical concept to be introduced is short-term and long-term goals. For Any expensive purchase on the bucket list your child, associate it with a long-term goal and encourage them to save it up for it.
On the other hand, regular purchases, which maybe aren’t that costly and recurring, could be termed short-term goals.
This will teach them to make choices, to maybe skip some of their daily or trivial expenses and save them for long-term purchase goals.
- Make them make financial decisions
There isn’t any better way to learn on the job. When your kids get a little older, start involving them in basic household financial tasks, such as shopping during festival time, buying groceries, etc.
You can even make them responsible for tasks, i.e., provide them with the weekly budget and make them responsible for deciding and buying fruits for the house.
This way, they will not only feel included and responsible but also learn to participate and make financial decisions.
- Teach the basic ways
Once your child grows up and learns the basic way of saving and spending, you can even open up a savings account for them and ask them to put aside some money every week or month to be deposited in the account.
Explain and make them understand how savings accounts will let their money grow with time.
- Involve in financial discussions
Do not keep your children away from the household financial discussion. Involve them in the discussion once they grow up enough to understand.
Encourage them to take part and keep their point of view too. This will build their confidence and make them feel involved and responsible.
They will listen and understand how the elders consider various factors while planning and deciding on any purchase or saving for future purchases.
Describe the situation and its terms & conditions to children so that they also learn to cope when their favourite toy gets broken or needs to be replaced. Would they have enough money saved for this exigency?
- Help them track their finances
It is essential to learn to keep track of your finances. Obviously, spreadsheets or spending apps will not be suitable for your kid, but maybe keeping a small diary with columns made where he/she is noting the expenses by dates.
Teach them how to total them at the end of the week, analyse how much is left, and tally or reconcile with the physical money left with them. When they are educated to track money at an early age, it is easier for them to do so their entire life.
Especially for long-term and expensive purchases, you can introduce the concept of small loans to your children. In Ireland, many parents choose this option.
Make your children understand the terms and conditions regarding the return of the money in the specified time frame.
You can go away with interest, but this practice will teach them to take loans and, more importantly, return them on time and not create bad debts.
If your child becomes financially responsible, you will be proud of them. Also, they will be able to manage their lives quickly. Some children like to follow in the footsteps of their parents. Hence, you have to be careful of your actions too. Do not be lenient with your finances in front of your children.