When it comes to saving money, it becomes important to have a direction and a destination in mind
Do you often find the question ‘What is the easiest way to save money’ crossing your mind? The two factors - savings and expenditure, where to splurge and where to cut down occupy your thoughts daily. Even as a parent, you have to keep a track of your expenditure while calculating or planning finance for your child’s future.
Having said that, it is true that while we want our children to grow up to be successful, we also want them to become financially independent. So what steps parents can take so that their children grow up to become financially independent? To begin with, it becomes imperative that parents start financial planning as early as possible. In this regard, let’s look at ways to go about it, and what should be your focus?
Create a financial plan
Financial planning isn’t rocket science. You can start by chalking out financial goals for yourself and your child. Mark the top two or three priorities that you want to accomplish within a certain period. Then, zero in further, arrange them in order of preference and start setting aside money accordingly.
Ensure goal-based expenses
It is no doubt that expenses for each individual vary from time to time, depending on the current need. However, when it comes to saving money, it becomes important to have a direction and a destination in mind. Once you have determined the financial goal, think about how to work on it. For instance, if you want to save for your child’s education or invest in a health insurance policy for your kid or both.
Maintain dedicated savings account for your kid
Open a separate account for savings for your kid and try to deposit a fixed amount every month in this account. Subsequently, when your child starts understanding the value of money and the importance of saving, you can let them know about this account. You can also ask them to deposit a certain amount from their pocket money each month. This way you can introduce children to the concept of savings and can teach them financial discipline.
Teach kids about financial independence
In simple words, financial independence means that adult children no longer need financial support from their parents. This doesn’t mean that you have to completely cut off your child from any financial aid. It is just that they can fully support their financial obligations without relying on support from their parents.
Children often learn about finances from the ways parents handle money, what and how they communicate? Therefore, start by communicating with them about simple money matters when they are young and making them aware of different financial responsibilities that may eventually come on their way. These practices will nudge them to pick up the necessary skills that will be helpful in the future.
In conclusion, financial planning is a process and is vital for all age groups. While the young have to plan for their entire life, the middle-aged have to ensure they don't fall short of money after retirement. The ultimate goal is to provide financial independence for children. Therefore, the sooner you can teach your kid about money management skills, the sooner they will be able to understand it and appreciate it.
The author is Co-founder of Junio
DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.