Like any other life skill, the foundation of money management skills is laid by catching them young. Children who grow up with their parents, who emphasize the value of financial literacy and simultaneously encourage them to spend & save responsibly, have positive outcomes as far as their financial future is concerned.

You are never too late to start educating your children about Good Money Habits. However, doing so is more complex than you think. Some parents lack the confidence in their financial acumen to feel comfortable educating their children about money. Others believe that it is wrong to subject young children to financial discussions or that they are too young to comprehend them.

When should you start talking to your kid about money?

Children’s financial education should emphasize on earning, spending, saving, borrowing, and sharing principles.

Starting from an early age is important

  • Children understand basic monetary ideas as young as three years old, and by the age of 7 (if guided correctly) children have usually formed lifelong financial habits.
  • It’s time to start teaching that material possessions are expensive. Give them a piggy bank, or even better, assist them in setting up spending and sharing jars so they can observe how their balance changes due to their choices.
  • Discuss sharing as a way of life with your pre-schooler or kindergartener. Show them how to set and achieve financial objectives.
  • And keep in mind that parents have the most significant impact on their kids’ financial behaviours; at this age, your kids are turning to you for guidance and an example.

Also Read: Taking a joint home loan? Check its pros and cons first

Getting them ready step by step

  • Age 7- 16 is a critical stage. At this age, one may allow the child to assist with grocery shopping while explaining choices on which stores to visit, which deals and coupons to look for, and which brands to choose based on price and spending limit.
  • Additionally, one should start discussing on things which are expensive such as purchase of a new property or vehicle to educate the child on wise methods to save.
  • Also teach them on how to see through cunning marketing scams, how to negotiate on price, and how to avoid the dangers of frauds.
  • Even at this age, you can teach kids about compound interest using facts rather than trying to explain the idea abstractly.

Crucial time

  • By the time your child enters high school, he/she should be able to comprehend more complex financial ideas and, at the very least, have an essential awareness of earning, saving, spending, and sharing.
  • You’ll also want your child to know the risks of maxing out credit cards, how interest works and what types of credit are available. Credit card firms specifically target college students!
  • It is very critical in present situation to discuss about value of money with your teen. This entails highlighting the distinction between wants and needs and ensuring they know your financial principles. These discussions won’t be simple, particularly when kids witness their peers wearing luxury clothing and using their parents’ credit cards to make purchases.

Wrapping Up

Even though teaching children about money can be a daunting task, the benefits for you and your child outweigh any potential frustration in the future. Parents have more material available to them now than ever, ranging from simulations and applications to dialogues and real-world situations.

The most crucial thing is to explain the importance of wise money management and give your child a chance to put these abilities into practice regularly.

(By Ashish Misra, Chief Operating Officer – Retail Banking, Fincare Small Finance Bank)