Let’s just begin by acknowledging how far we have come in terms of teaching life skills to kids. It’s great to see that the conversation now has shifted from, for example, whether children really need to be taught financial literacy to how to teach them financial literacy early on.
Financial literacy, in particular, has become extremely important now more than ever. Without being equipped with financial education, most adults around us have been finding it difficult to adapt and learn personal money management. In fact, now with the covid-19 pandemic ravaging the economy, financial planners say that even children have started realizing the impact their parents’ incomes and savings (or the lack of it) have on their lives.
But education of any kind, including financial, has to create curiosity and be entertaining - especially when dealing with kids. Making conscious efforts may often fail so making what you want to teach a routine habit is more likely to work.
Here are a few tried and tested ways to make your children learn lessons that would last them a lifetime-
1) Let them learn to earn:
A couple I happen to know give their kids “salary” for house chores that is deposited directly into the kids' bank accounts each month. The children have negotiated raises for their salaries by agreeing to take on additional jobs around the house. Sounds crazy good right? It’s actually fairly easy to get children to ‘earn’ for what they need - remember that bike that your son wants? The skating board your daughter asked for? Tell them they need to earn that money to buy what they want. They could walk the neighbor’s dog, babysit cousins or even wash cars! Children are more than excited to get the feel of being an adult. By understanding the relationship between work and money, your child will develop not only financial literacy but also life skills like responsibility, independence, and discipline.
2) The mall turns classroom:
Involve your children in purchase decisions. Ask them - how much did you earn this month? Is it sufficient to get you the dress you want? Are there discounts on the dress? Could you find the same item for a lesser price somewhere else? Do you really need the dress right now? Are you going to pay by cash or credit?
All of these questions would make them think about their decision over again. You may have the impulse of simply buying them what they desperately want but giving in to their whims is no good, parents. Let them evaluate the worth of money on their own.
3) Instil a habit of saving:
It’s important to teach kids from a young age that money isn’t just for spending - they should be saving money regularly, too. Use short, simple affirmative messages to encourage your kids like - Saving is a great habit, you can save to buy all the things you want, it feels good to save money and build your future. You can even go a step further and encourage children to save more by agreeing to match the amount they save dollar for dollar or by a certain percentage.
4) Educate kids on the basics of banking:
When you believe they are ready, introduce children to banking. Go to a bank and set up a savings account and have your child make the deposit and learn how to access the account online. Take this opportunity to explain the fundamentals, such as interest, deposit, withdrawal, cheques, loans, etc. Keep a close track of deposits, interest earned and expenditure and set aside time to review it together so you can talk about budgeting and setting goals.
5) Teach them investing:
Saving money is a great habit but if you truly want your kids to learn how to build wealth, teaching them about investing is extremely important. Teach them how money can grow by investing, what the different instruments one can invest in and how risk varies between these instruments. Teach them how you can grow as well as lose money investments. Take it slow so they aren’t overwhelmed. Some kids are ready for it at a young age, Some maybe a little bit later.
6) Model good financial behavior:
Just as important as the lessons you teach your kids about money are the ways you discuss and handle money when you’re around them. For example, if you complain about having spent too much on certain things and then take your kids on a shopping spree, you’re sending mixed messages. Instead, make sure you model the behaviors around money that you want your children to adopt.
Lastly, let your kids make independent money decisions even if it means making mistakes and wasting their money. It's the most valuable teaching tool, parents. We can all agree that spending money badly has taught us more than spending it wisely. The best money lessons that we have learnt as adults are from going broke, recklessly spending or missing on EMIs - not by saving wisely or filling SIPs! We could partly blame that on lack of financial education as kids but now that we know, we can prevent that from happening for our little ones. Cheers and enjoy the process!