Money Management Lessons For Your Children

As parents, you are constantly teaching your children alphabets, numbers, and healthy eating habits. You also teach them to be kind, honest, sympathetic, and brave, among many other lessons. Then why not take the time to help your children learn how to manage money? 

Children’ money attitude is shaped by family. They pick up on whether you plan your shopping, put money into savings, or spend irresponsibly. So, start by discussing financial matters with them at home. Moreover, if your child is accompanying you for buying groceries or shopping, seek out those moments as a teaching opportunity to impart basic financial terms such as earning, saving, spending, and donating. You can also take them to the banks or the ATMs to let them learn how you take out money from the savings account and explain it to them while doing it. Why does it become imperative to educate your children about money matters? Simply, so that they grow up to become financially responsible adults.

Let’s look at a few money management lessons you should teach your children: 

Money is earned: Nowadays,most children get pocket money or allowance from their parents. However, they need to be taught thatmoney does not come for free. One has to work hard to earn money. To begin with, seek out your kid's help and assign them a few household chores such as switching off the lights and fans when leaving the room, watering the plants, or making their beds. Once the task is completed, reward them with allowances. On one hand, this practice will nudge them to pick up good habits and on the other, they will learn that money is earned after the completion of a task. Therefore, allowance becomes an important part of how children learn about earning, budgeting, and managing money. Hence, earning is learning.

Make budgeting a joint affair: Now that children have a basic understanding that money has value and what it means to work and earn, it is also critical to teach them how to create a budget to manage their money. Involve them too while you are chalking your monthly budget. A child’s participation in the family budget planning will help them know where to reduce the expenses. You can also ask them to create a budget for themselves on how they are planning to use their pocket money. Budgeting is a skill and developing this will be helpful in the future when it comes to making big investments. 

Explain the difference between need & want: This is one of the most important factors to understand when it comes to spending money. Teach your children the difference between wants and needs at a very young age. You can initiate this by giving your child a list of choices and help them develop their understanding by categorizing the items under need or want and why. 

Learning how to save: Along with budgeting, learning to save is equally important. Saving means setting short-term and long-term goals. For instance, you can ask them to set a goal like buying a cycle and encourage them to save for the same. Having learned about savings and investments at a growing age will help them to manage money judiciously life-long. You may also give them a piggy bank which will further instill the habit of depositing and saving. It's also best to avoid instant gratification.  

Teaching them about financial transactions: As kindergarten children, they are too young to understand in-depth money matters and learn about credit cards and loans. But once they reach middle school, start teaching them about transaction processes, how to maintain an account and keep it secured, and the theory behind loan and interest. You can also help them open a bank account that will further help them start saving for their future goals.   

The importance of giving: While earning, saving, and spending are important, so is giving or donating to those who are less fortunate. Explain to your children why you donate money to charity and encourage them to give some of their allowances to those who need help. Learn about what your children feel strongly about and show them ways to help. Suppose, your kid loves animals, help him or her to raise money for a local animal shelter. It is also necessary to inculcate this understanding that giving of their time is an important way to help others when they don’t have a lot of money to donate.

We certainly understand that money management is one of the most valuable life skills. Imparting money management lessons does not necessarily mean teaching children to be wealthy. It is about helping them to build confidence and become independent in terms of handling money wisely.

The author is Co-Founder, Junio