Our life is the ultimate outcome of choices and decisions we make. We all learn making better decision with experience. As a parent we want our kids to learn from our experience so they don’t make the same mistake as we did. We all want to give everything best to our kid’s best education, luxurious life and all the possible happiness in this world.To make this children’s day special, this children’s day gift your kids priceless money lessons from your experience that will make them a financially wise adult.
1) Write Goals and Savings Charts
It shouldn’t come as a surprise that those who write down their goals are more likely to reach them. Teach your children to write their goals with clear deadline by which they want to achieve it. This will make them think deeply and make them a better planner in long term.
2) Categorizing wants and needs
Good financial decisions start by being able to distinguish between what is necessary to have and what is nice to have. Children should know the difference between needs and wants. Encouraging children to spend on their needs first will help them prioritize things in life and help them understand that resources are always limited we should optimise it to our best by making wise decision.
3) Perils of lifestyle inflation
At least once in our life we all are bitten by this life style insect, it better to warn your kids in advance. Lifestyle inflation can essentially prove to be harmful to your kids if they are not careful with their spending habits. Just because you can afford to live a more opulent lifestyle doesn’t mean you must. A few splurges here and there don’t hurt anyone, especially if you have the cushion of an expendable amount of money to spend on non-routine purchases, but making a habit out of it is what leads to lifestyle inflation and utilizes the money you could have potentially saved to put to good use in the future.
4) Allow them to operate their Bank accounts
Today a lot banks have products specially catering to young children. To make learning about money a fun activity, you can incorporate these products into your simple money lessons .Young minds are always curious and highly malleable. They are more receptive towards learning new concepts and experiencing new things. This shall allow them to have access and learn the basic operational knowledge of banking, accounting and saving at a young age.
5) Magic of compounding:
Introduce the concept of compound interest, in which you earn interest both on your savings as well as on past interest from your savings. As parents, one might stress too much on imbibing the ‘saving habits’, but just as important it’s to save and invest it is equally essential to shift their thoughts towards long term money planning and help them experience the magic of compounding early in their life. Encourage them to set goals and invest in accordance. Once they achieve a milestone, let them use the money to fulfil their aspirations
6) Never undermine the importance of an emergency fund
We all hate thinking about negative possibilities and just hope that they never happen to our loved ones. But we elders also understand that life has its own plan and we always maintain some liquidity for emergency. We also ensure that on daily basis we give our kids some emergency pocket money. In any situation we don’t want any negativity to come near our kids .After all, why dampen their dreams? While we shouldn’t scare them but it is equally essential to keep it real for a child. Teach them the need to build an emergency fund. Personal finance security also helps to boost confidence and taking right decision without any monetary pressure.
7) Good Loan vs. Bad Loan
In future, at some point of time your kids will have to take loan. You should teach them the clear difference between Good loan and bad loan. So they don’t get trapped in any debt crises. It is important to understand that loans taken for assets appreciating in value could prove to be actually beneficial in the long term, and at the same time, identifying the loans which are hampering their financial stability must be controlled in time before matters go out of hand and they end up regretting later.
Based on your child’s age group, you can start with simple financial lessons and then introduce more complicated concepts as they grow up. We all want to save money for our kid’s future but one of the best and safe ways to accumulate savings for your kid’s future is to teach them money management lessons in their early years.