‘Finance’ is a term which is involved in every second thing that you practice on a day-to-day basis. Whether it is buying groceries, paying bills, traveling to the office, using 24 hours internet, everything adheres to a financial decision.
That makes money management an essential skill to learn. With proper money management, you can accomplish your goals smoothly.
What Financial Management Is All About?
When we talk about ‘financial decision’, it is not only about how to spend but also how to save, invest, and share. All these are branches of the tree called Financial Management or Money Management.
It is often said that only those can do well in life who can do well with money. Here’s a crucial thing to understand that earning money is not the key to a prosperous life. Money needs to be strategically managed and backed by rational financial decisions.
Teaching kids about money can begin as soon as they start counting. For starters, explain to them what it is used for and why you need money. Then you can gradually make them understand about earning, spending, and sharing.
Research shows that money habits are developed in children by the age of seven. Therefore, the earlier you introduce your kids to money, the better it is.
Starting early is a great thing, also because learning and developing money habits can take a good amount of time and understanding.
Parents are the first teacher
Among several other habits that kids take up from their parents, one is money management habits.
Yes, they absorb everything that they see you doing. Therefore, to ensure that your kid picks up the right habits, you need to practice those yourself. Set an example for your kids. This would be the first step towards teaching them what financial management is?
Take them grocery shopping with you, allow them to ask questions, make them understand why you chose a particular product over other. Explain to them about the value of money.
Studies have shown that parents in general do not discuss money with their children. However, children are curious about knowing about money and want their parents to help them learn about it.
There are several proven ways which can help you teach your child money management habits in a simple way.
Here are 5 sure shot ways to teach your kids about money and how to take financial decisions:
Set an Example
Children absorb what they see around them. To start with, take your kids shopping with you. Go grocery shopping with them and let them see that these things cost money. After a certain age, explain to them how you compare products and what to look for to buy the right one.
Involve them in money management. Discussing money with your kids can make them comfortable with it. Put money as an essential part of life and teach them its importance.
Give them allowances
Your kids should understand that money needs to be earned. And asking them to complete certain chores to get small amounts of allowances can be helpful. This way, they will understand the value of money.
Also, they should learn how to manage their money. Whether to spend it all, or invest and share as well.
Help them build a Savings Habit
Saving habits are to work upon to eliminate overspending or wasteful spending. Give your kids a piggy bank or a jar and a goal to complete. Suppose, ask them to save 100 bucks out of their allowances in 6 months.
This will help them take calculated decisions. Kids will be able to differentiate between wants and needs.
Just asking them to save won’t be all. Elaborate on how saving plays a pivotal role in money management. Introduce them to contingencies and risks.
Teach about Sharing and Investing
Along with earning and saving, sharing and investment is equally significant. Tell them about sharing money in the form of helping and charity.
This will teach them compassion and empathy. Teaching them about investment, on the other hand can help them develop new perspectives.Teach your kids about investing and compound effect.
Discuss and take financial decisions
Children tend to understand better when they are involved in that thing. Take decisions about their life mutually, involve them and make them understand the pros and cons of those decisions.
For example, ask them to save for their college life. Talk to them about how you are going to pay for college, etc.
Apart from these super helpful practical habits, kids can also learn a lot about what financial management signifies, through books. Books on related topics can give them a broader perspective. Here are the five best books kids and teenagers can read to learn about money:
- ‘Money Math: Addition and Subtraction’ by David A Adler
- ‘Arthur’s Funny Money’ by Lillian Hoban
- Sheep in a Shop, Nancy Shaw
- The Missing Money Money Monsters, Okeoma Moronu-Schreiner
- Bunny Money, Rosemary Wells
You can get all these books online on Amazon.
Learning about finance and money should start at a young age. Money is an essential part of our lives and one should know how financial management can help them lead a good life.
Hence, as parents, you should try teaching your children what financial management is, at least the basics. So that when they get their first salary, they know how to use that.
Thank you for reading!