18.11.16

Teaching Kids the Value for Money

Teaching Kids the Value for Money
Since most of our adult life revolves around making enough money to meet our needs, it is rather surprising that schools do not teach children about money management. RobinAge tells you how to introduce your children to the world of money.

Waiting Before You Buy
This is a hard concept to learn for people of all ages, not just kids. The ability to delay gratification helps children grow into patient and successful grown-ups.

Kids of all ages need to know that buying gifts, toys, presents, books or even stationery involves money and one has to prioritise one’s needs. Money lessons at this age set the tone for later on. Kids also need to know that every trip to the supermarket doesn’t necessarily mean they have to buy something for themselves. What’s more, children’s moods, needs, demands and likes change as fast as the day! Let them sleep over their choices for a day or two before they actually make a purchase.

Making the Right Choice
It’s important for children to know that money is finite and they need to make wise choices when they spend it. If they really want something, they should wait and save up for it. If you get children
to contribute a part of their savings or pocket money for their purchases, they will be a lot smarter about their choices. It’s also good to introduce younger kids to activities like saving, spending and sharing. This teaches them about the value of money.

Educating Children
As your children get older, you can include them in your conversations regarding saving and spending. This will teach them how to save money, how to make it grow and most importantly, how to spend it wisely. For older kids who have a bank account and are studying simple and compound interest, you can allow them to spend only as much money as is made on the interest they earn. This way, the capital will be untouched and they will learn the value of compounding.

Compounding
This is one of the most important lessons to learn. Saving needs to have long-term goals. Introduce children to the concept of compound interest, where you earn interest both on your savings and the interest from your savings.

Learning from Purchasing Mistakes
Let your children be responsible for their own buys. Even if you think your child will tire out or get bored of a purchase, let them buy it if they don’t listen to a warning. What’s important is to not replace the purchase with something else if your child gets tired of it in a day or two. That is the best way to teach children to make the right decision and think about their buying choices.

Planned Buying
It’s a good idea to teach children to plan their buys in advance. This is especially important if there is a festival, occasion or birthday coming up and you know the child will go shopping. Items that can wait can be clubbed into this budget. This will also help children realise that waiting will help them get a bigger gift, if they manage to save more money.

Opening a Bank Account
Learning to save early in life and being acquainted with a bank and its workings is one of the best ways to learn about banking services and the importance of saving. Get your child a junior banking account. Some banks also issue debit cards along with such accounts.

Keeping Records
Let children see their money grow by showing them their account statements. This will also teach them about simple interest, compound interest, withdrawals and recurring deposits, when made.

Smart Buying
It’s fine to introduce kids to online buying portals and shopping experiences, especially in today’s day and age when one gets better deals online and during sales. If your children don’t need things urgently, let them know when the next sale is and that they might get more than one product for the price of one during sale days. Also teach children to evaluate the offerings from different suppliers and choose the best offer.

Be Wary of Credit Cards
Credit cards are the easiest way to spend money, but remember, they come with a huge liability—interest. Teach your kids about the interest a credit card company will charge if one is unable to make the payment on time. Sometimes, due to the interest charged, one ends up paying a lot more for a product as compared to if one had bought it by putting down cash or using a debit card.

(Image Courtesy ThinkStock)

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