Wise money management is the key to a financially secure life. However, one does not master the skills of money management overnight. It is developed over years. The earlier you start, the better money manager you become. So, it is important that you start inculcating money management skills in your kids, right from a tender age and help them grow up as financially wise individuals.
Often, parents get confused as to how should they begin introducing monetary concepts to their little ones. If you are one of those parents, taxing their brains out thinking how to educate their kids about personal finance and money management, then here are some easy ways to make your kid financially aware.
Ten Tips on Financial Awareness
- Introduce your kids to money as soon as they learn to count. Take an initiative to provide them with bits and pieces of information related to money. With continuous observation children learn things faster.
- As your kids grow up, convey the money related values to them. Teach them in simplified terms why and how you should save money, how you should multiply your funds and of course why and how should you spend money wisely.
- Then introduce the importance of budget in one’s financial issues. Explain to your kids that budget is the key to one’s financial freedom and it is absolutely important to stick a monthly budget.
- Help your kids learn the distinction among needs, wants, and wishes. It is a great way to instill good spending habits in them.
- Introduce the importance of savings in one’s life. Explain in simple terms how earning interest on savings can be profitable. If possible, pay interest on money your kids save in their piggy bank; then help them calculate the interest and show them how fast money accrues through compound interest. With this, you can also help them realize that the quickest way to a good credit rating is a successful history of regular savings.
- Help them learn the about investments, once they accrue considerable savings over time. Wise investment is one of the pillars of money management. So, enlighten your kids about the importance of investment once they start saving.
- Expose your kids to the financial realities you are in. Concealing the realities from kids does them no good. If you are facing financial hardship, let your kids know about it. A good understanding of personal finance is one of the indispensable life skills a person can have.
- Reduce their exposure to advertisements. The more they are exposed to ads, the more they crave for or indulge in frivolous expenditures. A check on exposure to ads can help them check such extravagances. But, here it is very important that you explain to your kids how frivolous spending can harm your finances especially when you are financially strapped.
- Educate them about the pros and cons of credit card usage. Make it very clear to them that how much convenient the plastic money might look, it is actually an incitement to over-expenditure. So, help your kids learn the difference between spending and over-spending with a credit card. Also explain to them how debit cards are more advantageous than credit cards. Since debit cards are connected to your checking account, they can prevent you from overspending unlike a credit card. Tell them that credit card usage is to be made an exception, not the regular habit.
- Encourage older kids to find a job. It is a great way to make your kids become responsible, because in a way, they will stop depending upon their parents for every little thing they want to purchase.
Financial disasters can hit anytime. But wise handling of money can prevent you from falling prey to the disaster. So, start educating your kids about the importance of money management and safeguard them beforehand against any future financial crisis.