Money is an important aspect of life today. And so, its never too early to teach children the value of money and how to manage it. In fact, money management provides decision-making opportunities that could prove to be valuable life lessons. Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend.
Here are a few simple tips you could follow to teach children the value of money:
-Introduce children to money as soon as they can count. Communicate your values clearly: how to save it, how to make it grow, and most importantly, how to spend it wisely.
Teach Kids to Differentiate Between Needs, Wants & Wishes
This will form the basis for good spending decisions in the future.
Goals are fundamental to learning the value of money and saving. Every toy or item that your child wants to buy can become the object of a goal-setting session. And, goal-setting will help children learn to become responsible for themselves.
Introduce Kids to the Value of Saving Vs Spending
You could even go a step further and explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest.
– by giving them money in denominations. For example, when you give your child a weekly or daily allowance of Rs. 100, give it in denominations of 10s or 20s so that it will be easier to put away a portion of it as savings.
Keep a Record of Money Saved, Invested or Spent
You could teach kids to use 12 envelopes, 1 for each month, with a larger envelope to hold all the envelopes for the year. Encourage children to place receipts from all purchases in the envelopes and keep notes on what they do with their money.
Use Regular Shopping Trips to Teach Kids to Spend Wisely
When you take children to the supermarket or stores, explain how to plan purchases in advance and make unit-price comparisons. Show them how to check for value, quality, reparability, warranty, and other consumer concerns. Spending money can be fun and very productive when spending is well-planned.
Teach Children how to Evaluate TV, radio, and Print Ads for Products
Will a product really perform and do what the commercials say? Is a price offered truly a sale price? Are alternative products available that will do a better job, perhaps for less cost, or offer better value? Remind them that if something sounds too good to be true, it usually is.
Alert your Kids to the Dangers of Borrowing and Paying Interest
If you charge interest on small loans you make to them, they will learn quickly how expensive it is to rent someone else’s money for a specified period of time.
Teach Children About How Credit Cards Work
Explain to children how to verify the charges, how to calculate the tip, and how to guard against credit card fraud. And as a parent, exercise caution before getting a credit card for your child.
Allow Young People to Make Spending Decisions
Whether good or poor, kids will learn from their spending choices. You can then initiate an open discussion of spending pros and cons before more spending takes place. Encourage them to use common sense when buying. This means doing research before making major purchases, waiting for the right time to buy, and using the “spending-by-choice” technique.