Parents can use the occasion of Children’s Day as an opportunity to let their children practice money management.
November 14th is celebrated as Children’s Day in India. Children look forward to this day. They request parents to buy them their dream purchase on this day. It could be a gadget, a sporting gear, or a list of miscellaneous things.
Every family encounters this scenario. The question to be asked is, “Can this situation be converted into a learning and habit inculcation opportunity”?
The answer is 'yes'.
Money Management is an essential life skill. However, it does not get the due importance that is given to academics or even sports. According to a study by the Financial Industry Regulatory Authority (FINRA), teaching financial skills to children before they enter college or the workforce is crucial in helping them to grow into adults who can achieve financial security and success.
How can children learn money management skills? How can they become future ready?
Let’s make it happen this Children’s day. Parents can use this occasion as an opportunity to let their children practice money management. Parents should give children the entire allowance for a month and assist the children in planning and budgeting their expenses across a category of things that they would want to buy. This will not only give them a sense of responsibility but also enable them to make well-informed decisions.
Parents can begin teaching basic concepts of money management to children by following these simple steps:Planning
When you give money or allowance, ask children to enlist the items they want to buy, the tentative costs of each item and if the allowance would suffice for a month. You are likely to find them coming back to ask for more.
Throw in a challenge
When they come back, throw in a challenge. Let them know that if they can manage with the allocated budget, there would be a reward at the end of the month. Spell out the incentive clearly and get them enthused to take on the challenge.
The 'Savings' Habit
How about enhancing the reward further if they save from the amount you gave? This will not only get your children thinking but also make them look for the best deals across clothes, gifts, gadgets among other things. It will be an interesting challenge for them and they would take the first steps towards smart money management.
By undertaking this small but significant money management exercise, parents will be able to change the way children perceive money and its value. This initiative can sow the seeds for transforming a child’s mindset from a 'sense of entitlement' to a 'sense of accountability'.
By continuing this exercise over the next months and years, parents can enable their children, especially the teenagers, to enjoy the freedom of managing money by themselves. The best Children’s Day gift would be to empower your children to grow into a financially prudent adult. Let’s take the first step today!The writer is Founder of Slonkit. Views expressed are his own.You can now invest in mutual funds with moneycontrol. Download moneycontrol transact app. A dedicated app to explore, research and buy mutual funds.