One of the greatest gifts you can give your kids is to prepare them to be responsible,
empowered adults around money.”
There is one thing that my parents have always insisted on, “equip kids to be financially literate and independent”. They always practiced & preached this and stood by their belief against all odds. I remember how their ideology of a girl’s financial independence was criticized by many, but they never gave up.Today when I look back I realize, it was them, who encouraged & influenced me to learn to manage my personal finances, handling bank accounts, saving, budgeting and taking charge of financial well-being. Back then when this was-not-so-socially-accepted-practice.
So how do we instill good financial habits in our kids, to be money savvy and empower them to make their own financial decisions when it’s time? Here are 7 effective tips for your kids financial coaching.
1. Lead By Example:
They observe and learn most of the fundamental habits by us parents. How money works is something significant to be taught, to lay a strong foundation. “Modeling a financial behavior that we want them to learn and adopt, is perhaps the best way to teach.”
2. First-hand Experience:
Let them know and understand while making purchases particularly related to basic needs e.g. grocery, their clothes & shoe, books & stationary etc., Shop together and sometimes let them make the payments to experience how it works. When writing cheques and making basic simple household budget share with them. Discuss price comparison, availing discounts, quality matters, reward points, deals etc. in age appropriate manner.
3. Weekly or Monthly Allowance:
At one or the other point in time this has to begin. Utilize their allowance as a medium to teach and guide them about managing their funds. Saving, spending & charity as important factors to divide the allowance. It is equally important to let them learn through their mistakes i.e. bad purchase decision is another learning.
4. Piggy Bank aka Desi Gul’lak:
A simple, easy and effective way to teach the art of savings, remember all those clay gul’lak we had in our childhood and the joy they brought while breaking. The happiness of buying something from that “qatra qatra darya” money was another level.We have a house rule, whenever we receive change while making payments, we hand it over to kids to put it in their ‘smiley bank’, once filled we give them a chance to either eat or buy something of their choice. Handling physical currency is a good way to learn about money. Additionally a chance to learn value of money.
5. Do the Chores & Earn an Allowance:
This is suitable for kids above 10 years as they have better understanding for such practices. Make them do an appropriate house chore or any other suitable task and reward them for their services, as beginning of tasting the flavor of their own earning.P.S. A fine line between chores done for helping family members as a responsibility vs tasks performed to earn reward needs to be highlighted.
“The habit of saving is an education itself.”
Perhaps the best thing we can teach them towards their future financial behavior. Explain, practice and encourage kids to save a portion of their allowance or cash rewards earned. As parents our own practices also play a vital role in this learning process.
7. Hypothetical Situation:
Buying a certain Lego set vs investing in a video game, which will be a good value for money, entertaining and long lasting. Their age appropriate hypothetical examples, while making a purchase decision could assist them learn a valuable lifetime lesson, weighing outcomes and be a wise consumer.
No matter how many tips you go read about, practicing them will matter the most.