15 Tips to Make Your Child “Money Smart”

Children understand money as something that gets them what they want. But, at the same time they should also have the understanding of its value, how it is earned and where it comes from and the importance of saving it. As a parent, teaching your child about the importance of money and how to handle money responsibly is one of the most important life skills that you should instill in our child. Teach her money related values and take an active part in imparting knowledge and provide information that would benefit her. So, start now and teach the following money management tips to your child and gift her a brighter and shinier future. Here are some key points on how to teach your children the ABCs of money:

1. Start Early : 

   

   An old adage states “the earlier, the better”. As soon as your child starts to count, introduce the concept of money to her because it is always better to instill good habits in your child since a very young age. The earlier you inculcate good money management in your child-the more it becomes second nature. Therefore, by training your children to save and invest money from a very young age, you will ensure that she manages money properly and efficiently in her later years.

2. Discuss Together: Talk regularly and honestly about money with your child.It is important as a parent to make your child feel that money doesn’t come for free. Teach her how hard it is to earn money and the importance of saving, investing and spending money intelligently. Talk to her about the importance of money and the hardships included in earning it. Once she realizes the hard work that goes behind earning money, she will definitely respect money and use it for better purposes. For this, emphasize your viewpoint by giving appropriate examples and rather demonstrating yourself.
3. Start allowance and give cash: Allowance is the first step towards learning how to save. Therefore, give your child a monthly pocket money that will help her to manage and plan her savings and expenditures accordingly. This is one of the best ways to teach your child about how to tackle money and how to spend it smartly & efficiently. This will also make her realize and understand how difficult it is for the parents to handle monthly expenditure of the house. Also, keep in mind to give a modest allowance. Regardless of your financial status, the allowance for your child should always be nominal. This will avoid spending habits and showoff or inferiority complexes in your child.

Remember, before fixing an allowance, always consider the following factors:

• Your child’s age: Obviously, the older your child, the bigger the allowance
• Your family income: Only you know how much your family can afford to allocate to allowances.
• What the allowance is supposed to cover.

4. Teach Money Choice:When your children already have money in their hands, they may tend to think of using all of it to purchase their favorite foods and toys. Create a simulated bank and give your child the four choices of money i.e. Save, Spend, Donate and Invest. Make your child understand that each time she has money available to deposit, she should first think about their choices. This will teach them that there is more to do with money than just spend. Also, teach your child to set goals for each money choice.“Saving without a goal is like a cricket game without a score”. So, when explaining about the money choices, make sure that your child has a picture in mind of what he is working towards so that he remembers his goal and stays motivated.
5. Involve your child: You may involve your child in the process of saving money. Every week, take your child to the nearest grocery store and tell her what your budget is and let her help you buy things under that set amount. Also, prepare a shopping list together. Also, ask your little one to check off the items and its price before putting them in the trolley.This will prepare her for making good spending decisions in the future.
6. Tell her the difference between Necessities and Luxuries: As a parent, you know that the weekly grocery bills are necessities, while dinner out on a Saturday night can be classified as a luxury. This distinction between what you can’t go without and what is only icing on the cake is something that you need to teach to your child. Understanding of this distinction while children are young will help them make good decisions on how to spend their money when they’re older. Help your child to learn the difference between what she needs and what she might want or wish. For this, ask her to prepare two columns. In the first column, ask her to list the things he requires and in the next column, ask her to write down all the things he may desire. (Some hints on necessities may include school, doctor’s visits, medicines, and clothing.) Now, review his list and help her reassign certain items from necessity to luxury and vice versa. For instance, explain her that no matter how important that video game may seem to her, it’s not a necessity.
7. Teach the value of saving: Keep a cute piggy bank in your child’s room, which would encourage her to save a portion of  her allowance and gift money on a regular basis. Discuss the target amount to be saved for the ‘party’ by the end of a certain period of time. For example, your child can buy a new Barbie set or a hot wheels car game by saving a portion of her allowance for a couple of months.

   

8. Make money visible: Explain ATM and credit cards to your children. Children might think that money just comes from a machine and that you can pay your bills just by using a card. Explain them that ATM is like their piggy banks; you are taking your hard earned money from your own account and it is not free money.
9. Let your child “earn” it: No matter how much you love your child, never bestow her with everything that she desires without her making an effort to get it. Hand over some interesting household chores to your child and make your child earn money as reward. For instance, you can ask your child to prepare a list of her favorite songs for the weekend parties, cleaning the room, place all books properly in the study shelf.
10. Help them buy something: The next time you’re on vacation, tell your children that each of them will be responsible for one family meal during the trip. Help them budget this expense, choose the restaurant and complete the transaction at the restaurant. This idea will reinforce the idea of saving money for a future expense.
11. Teach your child how to evaluate advertisements: Children easily gets influenced with the flashy advertisements they see but it is important to teach your child that not all they see on TV and print ads are worth spending their money on. Therefore, teach her how to evaluate products first before buying. Also tell her that there may be alternatives which offer the same quality but at a cheaper price.
12. Listen to your child: Don’t scold your child for overspending or making the wrong buying decisions. Instead of scolding, explain your point in an interesting way by giving examples of a better deal or a better quality product that you have heard about from a friend or an advertisement. Ask your child’s opinion on such information and take the flow of the conversation towards proving your point with patience.
13. Play games: Children love to play games. So, play various board games like Monopoly, Thrive Time, Beat Debt, Money Match Game and Business India with your children. This will make children learn about money and its usage.
14. Teach them about social responsibility: Remind your child that money is not everything in this world. Sharing your blessings to less fortunate people is important. Also, teach her to donate to charities. Teach her about frugality and to appreciate what they have. Let your children know when you see a great example of generosity among them or their friends. Praise the person who showed the generosity in front of your children as well as privately. Don’t just say “good job.” Say something like; “I’m so proud of the way you shared your toys with Kanav. It made him so happy “
15. Be a role model: “Parents are the child’s first teachers.” To teach good spending habits and money discipline in your child, you need to first introduce those habits to yourself. So, set a great example for your child by working on your own money management and personal finance skills. Make sure that you do all of the things you teach to them. For this, always be reasonable with your purchases, pay bills on time, use cash whenever you can, credit rarely and take your children with you to make savings deposits.

Now you have something to start with. So, go ahead and teach your child how to value and save money. You can adjust any of these lessons to suit your own child and circumstances. Remember, this is a long process; you have to be there for your child to guide her on money matters till he becomes mature enough to take his own decisions. No matter what, teaching your children about money now will pay off later.

Best of Luck!

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