Raising Money-Smart Kids: Instill Budgeting Skills from an Early Age

New Delhi : A National Centre for Financial Education survey from 2019, called "Financial Literacy and Inclusion Survey" found that only. This can be directly correlated to the lack of any financial education for children in India. Think about it, how many of us did not learn about important concepts like taxes and life insurance till we started working? It is a persistent cultural issue, and if our children don't learn about money, they can't improve their lives or grow in an optimum way. It's important to understand money from a young age. 

Showing kids how to handle money and set a budget are important lessons. These lessons can help them do well with money in the future. When kids learn how to make a budget, they can decide how to use money, learn to save, invest, secure their future with life insurance, and understand how to be careful with their finances. 

In this article, we will talk about how we can teach kids about money. We will discuss things like giving them some money to use, having savings, and setting goals. We will also talk about how parents should act with money and why it's good to talk with kids about the family budget. 

Teach Kids Smart Ways to Use Money When They’re Very Young

From their preschool years, kids can embark on their journey of understanding money and budgeting. Start by familiarizing them with what money is and its significance. Engaging in straightforward activities such as pretend shopping, using make-believe currency, and facilitating mock purchases can illuminate the fundamentals of financial exchanges. 

As they mature, enlighten them about the virtues of saving and judicious spending. A practical approach is offering them an allowance. Establish transparent rules about its utilization. Guide them in dividing their money for saving and spending purposes. Illustrate the benefits of saving for distinct goals, like buying a desired object or earmarking funds for a unique event.

Use Saving Jars and Help Them Understand Goal Setting 

Having Saving Jars can help kids see why budgeting is important. You can have different ones for saving, buying specific things, etc. When you give them pocket money, help them divide it between these boxes. This will teach them to plan for the future and spend time carefully.

Embedding the ethos of goal setting is pivotal in the budgeting journey. Support them in defining feasible short-term objectives, like acquiring a novel or accumulating funds for a class excursion. Fragment these objectives into bite-sized targets to enhance their attainability. When they hit these markers, celebrate their triumphs. It reaffirms the premise that disciplined budgeting and saving yield real-world benefits.

Demonstrate Good Financial Habits to Them

Kids often watch what their parents do and learn from them. So, parents should be careful with how they use money. Parents should spend wisely, talk about why saving is good, and explain the family's financial decisions, like why they invest their money or why they buy life insurance.

Help Them Become More Patient 

In the renowned Stanford marshmallow experiment of 1972, kids were presented with a choice: immediate gratification with one marshmallow or patience for a more significant reward. Those who exhibited patience were later found to fare better in various facets of life. This restraint, vital for realizing long-term objectives, forms the bedrock of attaining long-term financial goals.

Such principles can be conveyed to kids through everyday scenarios. For instance, when a kid expresses a desire for dolls when you’re out shopping, tell them to wait for a subsequent visit or defer the purchase by a week. Initially you may see some resistance, but soon they will adapt and refine their impulse control.

Teach Them the Difference Between Needs and Wants

When you talk to kids, ask them about things they need and things they just want. When you go shopping, show them how to buy things they need first, like food, before things they just want, like toys. Tell them that they should always have a plan for their money. Impulsive buying should only happen when there's extra money.

Empower Them with Their Own Earnings 

Show your kids how they can earn money to save for what they want. If you can, give them some money for doing chores at home. Tell them how much each chore will give them. This way, they know how much they can save for what they want. 

Encourage a Summer/Part-Time Job 

As your kids become teenagers, tell them to save money by getting a summer or a part-time job and putting their money in a bank. Offer to add some of your money to theirs if they save. This can make them want to save even more. Always tell them to keep some money for unexpected things and think about investing their money, too. 

Conclusion: Make Conversations About Money Normal!

That’s it! Hopefully, with this education, your child will step into adulthood well prepared for the world. 

A lot of us never had the chance to encounter important conversations around money. We can have the buck stop at us, by bringing our kids into conversations about the family's budget that are right for their age. Tell them about things the family is saving for, like a holiday or school fees. Ask them for their ideas on saving money. This makes them feel involved and teaches them to think carefully about money.

With this kind of exposure, the next generation of our country will grow up more financially aware, savvy and will know how they can maximise their money. Lastly, you should look at getting a child plan for their future, so that when it is their time to venture into the world, they have a platform in addition to the knowledge. You can check out offerings by Edelweiss Tokio Life Insurance and secure your child’s future today!

Source: National Centre for Financial Education