While you teach your kid about the social norms and guide them through their life, it’s important that you also teach them about the importance of money and how to value it. Here are a few lessons you can teach them very early on.
#1: Patience is a virtue
The very first money lesson that you can teach your kid is “it pays to wait”.
Your kids are smart and sharp; they know that you probably have enough money to fulfill their demands. Whenever your kids demand something, ask them to be patient and wait.
This teaches your kid that not every outing means that they’d get to buy stuff. This practice will inculcate good behavioral habits like patience and restraint in your child.
#2: Either this or that
Teach your kid about plenitude.
Wants and desires are mostly impossible to satisfy. Teach your kid that what they have is more than sufficient. It is natural for a child to desire too many things- that too, all at once.
You must teach them the concepts of necessity, need, want, and abundance. When they demands for too many things at a time, make them choose only one of them.
Making a choices helps them develop a better understanding of prioritizing things.
#3: Earning a living is tough
When you swipe that card to pay your bills, your child might not realize that credit card bills need to be paid in full or that late payments can result in huge penalties.
Make your kid understand that everybody has to work hard to earn a living.
The best way to teach this is by introducing a reward system. When they put in extra effort to do something, acknowledge it with a reward and let them know that they have earned it.
#4: Borrowing and interest
Teach your kids about basic principles like debt and borrowing. Make them understand that if you borrow something (like a loan from the bank), you have to pay it back within a stipulated time period.
Here’s a simple exercise to teach your kids about borrowing and interest rate. Borrow a small amount from your child and then pay them back with interest at a later date. Explain that you had to pay interest on the borrowed amount and hence the child gets a higher amount than originally lent (and in turn, the parent had to return more money than borrowed).
#5: Money management
Pocket money is the ideal way to start with the money lessons.
Give them a fixed monthly pocket money at the beginning of the month- and not a single rupee more. Make them understand that expenses need to be managed with what they have.
#6: There’s no free lunch
From an ice cream cup to a toy, everything has a price tag.
You can teach your kids that managing finances is imperative for a sustainable living. For every need or want, you have to endow a cost- be it money or time.
When you plan your monthly budget, make your kids sit beside you and help them develop an understanding of how money gets spent; Even the nice aunty that comes to clean the house requires to be paid.
#7: Save for a rainy day
Savings will come in handy during the time of crises.
Make them understand that it’s better to save as much as possible from your income in case of future emergencies.
The best way to teach about crises and saving is by skipping on the monthly allowance once or twice. This would inculcate good habits of saving in your child and help them learn how to save money and manage a crisis.
#8: Live within your means
There are times when your kids will be influenced by their peer group and make demands which are out of your budget. Never be hesitant to tell your child that it’s out of your budget.
Your kids should know about affordability and be able to live within their means.
#9: Start early
You child needs to know that the earlier they start saving, the better it is.
If they need a bigger present for the next birthday, let them start saving from today. The earlier they start saving, the sooner they can reach their goals.
When they are older, you should probably teach them the most powerful word in finance- compounding.
Over to you
What other financial lessons would you teach your kids? Let us know via the comments below.