Talking money with kids: Where should you begin? 5 things to know

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Published: September 9, 2016 3:17:18 PM

Teenage children should be taught the importance of a budget. Tell them to make a record of their monthly money requirements and categorize them as per priority so that they do not spend on the things they do not need or need less.

Talking money with kids: Where should you begin?Teenage children should be taught the importance of a budget. Tell them to make a record of their monthly money requirements and categorize them as per priority so that they do not spend on the things they do not need or need less. (Reuters)

We want to pamper our children especially when they are little. We take it upon us to fulfill their every little wish. Sometimes, we do this while honouring the mythologies of the Tooth Fairy or Santa Claus, making sure every little festival, every milestone in our children’s lives—be it the fall of their milk teeth or their graduation from one class to another—are moments to celebrate.

But we also want our kids to understand that there are costs to our lavishing them. We want them to understand that money is hard to earn, easy to spend, and therefore meant to be used with great responsibility. It sounds very simple, but even grown-ups struggle to understand this. So how do you get this into the heads of your little ones?

Often, we teach them the value of money by delaying granting their wishes. Is that enough? Here are some points to get the money talk going with your kids.

GOALING: Children have difficulty in imagining long-term goals. It could be smarter to get them to set short-term savings goals. The goal could be saving up to buy a game or a bike. We need to encourage them to set and work towards such goals with a guarantee of gratification after achieving the goals. This would help them understand the value in planning, saving, and waiting.

WANTS AND NEEDS: As adults, we can easily differentiate between necessary expenses (needs) and the others that can be delayed or avoided (wants). However, kids may face trouble in differentiating between needs and wants. Hence we should provide them examples to help them learn to make the differentiation. For example, we can tell them that their school supplies, uniforms etc are needs and new toy or a dress is a want. Young teenagers and young adults, we can provide them pocket money and leave them to prioritise their own spending, helping them organically develop a sense for balancing their budgets.

BUDGETING: Teenage children should be taught the importance of a budget. Tell them to make a record of their monthly money requirements and categorize them as per priority so that they do not spend on the things they do not need or need less.

NO BAIL OUTS: Just like many of us struggle with our budget by the month end, kids too also face the same issue. They will come to you wanting more money. You can give them the money, providing them the easy way out. But if you want them to learn the value of controlled spending, you’ll have to deny them the extra money.

SAVING INSTRUMENTS: While you can instill saving habits in younger kids by giving them piggy banks, for middle schoolers and older kids you should open a savings account. Many banks offer such accounts for children where they are also provided with personalized ATM cards. This way you can teach them how to grow their savings by earning interest. They will also learn how the banking system works.

To sum it up, it’s not enough to provide for your kids. It’s also important to help them understand the value of those provisions.

The author is CEO of BankBazaar.com

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