I want a new doll. I want new toy car. I want a new video game. I want a play station.
These are the regular demands or say instructions given to parents by their children. Kids even at the age of two and half force their parents to buy something or the other of their choice. That means that kids can really understand the meaning of buying i.e. with money we can buy anything from the market. And this is the right time to start making them aware about the use of money, that how the money should be used wisely.
Children in their teens start believing that they can obtain whatever amount from their parents and gradually parents become like a borrowing bank for them. Most of them do not realize that the money they are spending is hard-earned by parents.
This happens because they have never been educated about the value of money and have never been trained to spend it judiciously. Kids should understand that money is always earned and that it paves the way for future wealth. The earlier you start the better it will be.
Here are some ways to make your child Money Smart
- As soon as the child starts counting, introduce him to money. Whenever you get a chance to show the buying system, inform the child about it.
- As the child grows, talk to him about your concerns of money. Motivate him to save it and also to spend it prudently.
- Help the child understand the differences between needs, wants and wishes. This will help him to take better money decisions in future.
- With your mutual consent (you and your child) bring a piggy bank for him. Also decide about the amount which should be put in the bank and at what interval. Ask your child to save a fixed amount in that piggy bank.
- The amount of allowance should be decided as per your own pocket and should not be based on the allowance his friends are getting. You may also create a formula for that. Like an allowance of Rs.5 or Rs.10 for every year of your child's age. Or say you can start with Rs.30 or Rs. 50 which will be increased every year by 20 per cent or 30 per cent depending on say his class performance or his behaviour throughout the year.
- When your child is asking or forcing you to buy every other toy in the market, don't be irritated instead use this situation for setting goals for him. Introduce him to the power of saving. That today, if he saves this money he can buy even better things in the next month.
- Demonstrate the concept of growing money by earning interest on savings. The child can also be taught to help you to calculate the interest on savings. Later on, the child will also realize that the quickest way to a good credit rating is a history of regular, successful savings.
- Maintaining a proper record of all the expenditure and savings is another thing that young people need to learn. Collect all the bills of a month and in the end of the month add and calculate the total amount spent.
- Kids are more fascinated with advertisements on television, magazines and other print media. Parents should encourage them to analyze whether all features shown in the advertisement are present in the product or not. Are there alternative products available?
- Help them to make buying decisions. Tell them the technique of sensible shopping. Encourage them to do research before making purchases, waiting for the right time to buy, and using the "spending-by-choice" technique. This technique involves selecting at least three other things the money could be spent on, setting aside money for one of the items and then making a choice of which item to purchase.
Last but not the least, kids always learn what they see and experience, therefore, parents need to present a good role model by managing their funds nicely. Also parents can discuss the regular shopping list with kids which will make them responsible for their spending decisions. By helping kids to learn money management we as parents can actually ensure a better financial position for them in future.