One needs to learn how to spend and save money the right way to lead a happy and content life.
The irony is that the concept of budgeting is not taught in school. A person understands its significance only after turning an adult. In order to help the younger generation live a financially healthy life, it’s important to teach them financial concepts from a young age. According to a recent research conducted by the University of Cambridge, children start forming money habits from the age of seven. It stated that the best concept to start with is budgeting, which involves how much money you earn and how to spend judiciously so that you save a tangible amount. Budgeting lays the foundation of money concepts in kids, as savings and expenditure are the core aspects of one’s financial life.
Start with an allowance
In order to teach your children monthly budgeting, it is important that they have real money of their own. One of the most important aspects to consider is deciding on the amount of allowance. You can either give a fixed amount which is equivalent to what you spend on your child—on toys, clothing, etc. or it can be a random amount. An innovative way to do the same would be to attach the allowance as payment for small tasks, for instance, you pay them a fixed amount if they run an errand for you. This will also be helpful to inculcate and develop in them the importance and value of money. It’s important to make children understand that money doesn’t come FREE.
However, make sure you have a balanced approach as an overemphasis on attaching the value of money with each activity may have a negative impact on your child’s mindset. S/he shouldn’t equate money
with happiness.
Lessons in budgeting
Just as one can’t learn how to play soccer by reading a book, likewise one cannot learn money concepts theoretically. Once your child starts receiving an allowance, it is the ideal time to teach him lessons on budgeting. One of the most preferred and ideal ways to do so is to use money jars. Give your child three money jars, each labelled as savings, expenses and charity. (It is important to inculcate the habit of charity right from childhood.) Ask your child to divide the allowance within these three jars. However, in order to do this, he will have to list down his expenses which will further teach him money management skills. Every time your child receives money, ask him to divide the same across all the three jars.
Finance in a fun way
Learning financial concepts need not always sound like listening to heavy lectures by an economist. It can be done in a fun way. Try and use methods which are easy for kids to learn and understand. The easiest and best way is to make them play board games such as Monopoly and Business Move, etc. which help to learn the concepts of money. As the new generation is more inclined to technology and gadgets, you can use financial software, mobile apps or even financial learning websites which will make learning monetary concepts a fun activity for your child.
A joint exercise
It would be wise to include your children in monthly household budgeting. This will help them get a first-hand experience of how things are managed. They will also learn how to prioritise requirements and leave out factors which aren’t important. One of the best ways to teach children about money is to ask them to organise their own birthday party. You can give them a fixed budget. This would be a good hands-on experience for them. It’s a known fact that lessons learnt through practical experience are the best teachers in life. However, money concepts cannot be generalised for kids across all ages as their understanding and maturity level increases over a period of time. So you can introduce complex concepts to them later.
Investment time
Money lying idle will not multiply unless the same is channellised in the form of investments. It’s important to teach children how they can make money work for them rather than the other way round. It is one of the smartest money concepts which, if learned and applied well, will work wonders in one’s financial life. An ideal way to do so would be to introduce to them the concept of keeping surplus savings in a bank account and teach them how to operate a bank account, which includes activities like filling pay-in slips, withdrawal slips, opening a savings account, filling a cheque, etc.
Start teaching your kids the significance of budgeting from today to make them aware about the importance of saving.
