Financial literacy is a must and if one starts at a younger age then the process of evolution of a financially smart individual becomes easier.
Lives of children are full of desires. Parents fulfill their demands due to increasing income patterns which has almost become a fashion in modern society. At times, parents end up committing financial mistakes as they forget about their finances when most of their needs and desires are met. However, financial literacy is a must and if one starts at a younger age, there are more chances of an evolution of a financially smart individual.
So, it may seem a good option to give your children a basic understanding of finances. Here are five mantras to make your children financially smart:
1. Allocate pocket money:
After proper analysis and discussion with your children allocate pocket money either on weekly basis or monthly basis. This gives an opportunity to teach your children a complete cycle of money management. Once you decide an amount then stick to it for at least a year. In a year various events shall come which shall push children to spend more and thus they shall have less funds at various times. If you are consistent in allocating the fixed amount then these events shall teach them to plan for their needs.
2. Inculcate saving habits:
Moment they get pocket money from you ask them where and how they would spend it. If the spending is less then push them to keep aside the extra money either in a piggy bank at home or at a bank. Give extra incentive by adding some amount from your side if they start saving from the pocket money. Allow them to use these fund for their hobbies or to purchase something they like.
3. Encourage entrepreneurial opportunities:
In a building or society where various cultural events are held, motivate your children to set up a stall or sell some basic things like natural colours on Holi or some food items that can be supplied from home. Putting up these stalls will give them a complete picture of a business cycle, including the overall cost of the stall, purchasing raw material from market, preparing final product and then selling it at a price that could fetch them a decent profit. At the end of the day, if they've earned a profit, then you should add the same amount to their piggy bank, which would motivate them to re-enter another business cycle in the next event.
4. Take them along when you go shopping or to pick groceries:
To buy household goods, head to a local market rather than sophisticated mall as it is these markets where you buy something and always bargain to get a lower price. Don’t buy from one shop. First find out the price of the things you want to buy at two or three shops and then check with the vendor who has quoted the lowest, negotiate the price further. After each purchase teach your child what you did and how you saved money.
5. Allow them to pay bills and help you in doing basic bank transactions:
When children enter adulthood, ensure they are handed over the money to pay bills for electricity, mobile or water. Although this may sound traditional, given the apps and online payment options available, you should ensue they know how to read bills and where to make payments. More than that, let them do basic banking for you like depositing cheques or withdrawing money. Such things will boost their overall confidence and broaden their thoughts towards money.
Last but not the least, always discuss your money matters with your children. Let them know why you spend less than you earn and why you’re saving for retirement. What is the importance of insurance and how much cover you have. Let them be aware about some of the spending options you have and why that means you can’t afford a new mobile handset or a foreign vacation every year. Yes, you need to talk to them with maturity and grace, as if they were an adult, and they’ll listen.
Teaching financial lessons is one of your most important responsibilities as a parent. Teaching them well will pave the road to financially successful children who would go on to become independent individuals, while you stand back and watch their journey with pride.( The author is CEO and Co-Founder of FinPeace Technologies)