Teaching children how to make better spending decisions will help them in the future
As a kid, receiving pocket money at the beginning of the month holds a lot of value as well as emotion. It’s like the very first experience of financial independence. It’s about what the amount received lets you do – spending it at the moment or saving it for the future. While some dutifully save it in a piggy bank, others spend the amount on stationery, sweets, or treats. All in all, receiving physical coins or notes as a kid has always been exciting.
Now, if we focus on the present scenario, it would be fair to mention that the nation is moving towards cashless transactions. And so are our kids. Does it mean no more giving pocket money? Well, not exactly.
Let’s look at it this way: you give cash to your children as pocket money. But of late their spendings have been mostly online such as purchasing games or ordering food. It further accelerated with Covid-19-induced lockdowns that forced kids to stay at home, stopping them from going out to play or meet with their friends. During this time, tap-and-go payments have emerged as the most prominent way of money transaction like never before.
Now, it’s true that digitization has made spending and purchasing faster and easier. But, it has also made it tough for parents to instill lessons to their kids around the real value of money in today’s digital era. In fact, in the age of instant gratification, when parents meet their children’s requests almost instantly, values such as the need to save up to buy their dream purchase are gradually fading away.
So, in such as case, imparting knowledge about budgeting, savings, and spending becomes vital. And as parents, you must instill these lessons in your kids from a young age. Why so?
Teaching your kids about how to make better spending decisions will help them in the future when it comes to making big investments as an adult. Responsible spending habits along with the discipline of saving as well as budgeting play a vital role in lifelong money management.
Against such a backdrop, let’s look at how you can begin teaching your kids pocket money management:
When you give them pocket money, ask them how they are planning to spend the money. Explain to them the difference between what is necessary and what isn’t. If they learn the importance of making a plan on how to spend the money in hand, it will help them develop smart spending habits from a young age.
Remember, you are the single biggest influence in shaping your kid’s attitudes towards money from a young age. In fact, according to several behavioral research, children start grasping basic money concepts from a young age.
However, they might be young to understand in-depth money lessons, you can still start by communicating about simple topics at home. For instance, seek out opportunities in your day-to-day activities - such as while you are buying groceries - to turn them into teachable moments for your kids.
Plus, they also see you using credit or debit cards when you are making any payment. But, they hardly have an idea of what is actually happening. Take this as an opportunity to explain to them the fundamental concepts of money. The earlier you start talking to them about money and its value, the better they will be able to learn the importance of financial responsibility and independence.
Today, you also have smart pocket money solutions or apps to teach your kids money management skills. For example, using these app-based services, you can instantly create an account for your kids to not just transfer pocket money, but also monitor their purchases. These tech-enabled solutions also help you set tasks - such as watering the plants or washing their dishes - for your kids to complete to earn their pocket money. This way they can learn the importance of setting a goal and the value of earning a reward.
In a nutshell, new payment technologies are undoubtedly triggering a revolution in how children look at spending money today. But as parents, your goal is to encourage kids to discuss money matters from as young as five years old. It is because it will help them develop positive attitudes, values, and behaviours towards money, and is the best way to nurture them to become financially independent and responsible in their lives.
The author is Co-founder, Junio
DISCLAIMER: Views expressed are the authors' 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.