We spoke to over 500 parents and one thing they all (96%) agreed upon was – “I wish I was taught money management earlier in life”.
Every parent wants their child to be financially successful. However, achieving financial freedom is becoming more complicated as the world evolves. Making children financially literate, by teaching them about earning, budgeting, saving, and investing, is one of the most important things we can do as parents, teachers, and mentors. By instilling a sense of financial responsibility early on, we can help our children build a strong foundation for their future financial success.
Here are some tips to help parents as they teach their children about money management:
* Start Early: The earlier you start; the more long-term benefits children will accrue.
* Make it Fun by playing games or setting up a mock store.
* Use Real-Life Examples to help children understand how personal finance applies to them.
* Be a Role Model through good habits and decisions.
But how, and at what (st)age, should you introduce your child to the concept of money, savings and investing? Below are some age-based guides and ideas to introduce you child to concept of money and help them work towards achieving their financial success:
a) Toddlers: Children begin to learn from the moment they are born through imitation, so parents can set a good example by showing children how to value and manage money.
Also Read: 5 reasons to read your bank statement every month
b) Pre-schoolers & Kindergarteners:
* Children of this age may not grasp the value of money, but they should be aware of the necessity of paying for goods.
* Children learn best through shared experiences, so get them involved in basic activities like the grocery shopping trip.
* This is also the right time to introduce jobs and careers, and how money is earned.
c) Classes 1 through 5: Children are likely to desire more now that they have a basic concept of money’s purchasing power.
* Making a living: Unfortunately, money does not grow on trees – it must be earned with chores for children of this age, which teaches the most important financial lesson – money is earned via hard work.
* Saving: Use a clear jar so that the child can see money grow over time. You can also introduce the concept of a bank account and possibly open your child’s account.
* Opportunity Cost: Even if you don’t use the term, a 10-year-old can understand the concept of opportunity cost. When one option is chosen, the opportunity cost is the loss of other options – impulse purchases vs. long-term goals.
d) Classes 6 to 8: Elaborate on the fundamental principles of income and budgeting.
* Income: Examine several career opportunities and talk about their responsibilities as well as their salary. This is also an excellent time to also introduce taxes.
* Budgeting: While your child does not require a personal budget at this time, it is a good idea for them to understand how to create one. Include them in your budgeting process by soliciting their feedback on meal planning and grocery budgeting.
e) Classes 9 to 12: Teenagers desire freedom and prefer to learn through personal experiences.
* This is the right stage for them to manage their own finances through bank accounts and budgeting.
* It’s important to help them understand the risks of using credit cards and loans.
* Planning for college expenses and discussing payment plans is also crucial at this stage.
* Encourage early investment in options like mutual funds and explain the risk-reward trade-off in financial markets, and in life!
Teaching children about financial management is important for their future success. With these tips, parents can help their children develop healthy financial habits that will serve them well throughout their lives. Fortunately, there are now multiple new-age platforms that help children develop these skills in a fun, rewarding and relevant way.
(By Karan Baweja, Founder and CEO, upsurge.in, India’ first platform for educational games that promote financial literacy, entrepreneurship and skill-development amongst children)