Parents can encourage the habit of saving among their children by giving them a goal to save a certain percentage of their allowances by the end of every month. Reinforcement should be done by rewarding the successful attainment of goals.
In these evolving times, wouldn’t it be great if children could be given hands-on experience at managing money independently? Here are a few tips for parents on making their child a smart money manager and a financially prudent citizen:
Provide them allowance
Parents usually have a set budget for their kids as pocket money. Giving allowances to children provides them the financial freedom to manage money, make affordable mistakes and practice the art of money management.
Every concrete plan begins with setting a goal. Children should be taught to set realistic goals for themselves. Parents should ask their children to plan their finances carefully with attainable objectives.
Help them with budgeting
Parents will definitely agree that one of the most basic aspects of managing money smartly is to create and maintain a budget. Parents should guide kids to set their monthly budget. If needed, help them categorise their expenses, put a cap on each category and monitor their spending across categories.
Teach children to think critically
Children are constantly being exposed to various advertisements and other marketing gimmicks. Hence, it becomes important to teach children to become conscious consumers. Children need to learn that sometimes products are not always what they seem, and they need to evaluate properly before making any purchase.
Make them ‘saving savvy’
Savings are of utmost importance for maintaining a healthy financial situation. Parents can encourage the habit of saving among their children by giving them a goal to save a certain percentage of their allowances by the end of every month. Reinforcement should be done by rewarding the successful attainment of goals.
enable them to negotiate
When the child’s intent is to save from her/his allowance, negotiation is a corollary. By negotiating a better deal when they spend money, children will become more accountable towards their expenses. The learning from this exercise would be a good step towards making the child a smart money manager. Are you prodding your children to negotiate better when they make their money decisions under your watchful guidance?
Make the experience “enjoyable”
Imagine giving your child an allowance for a month while challenging them to spend less than 5 percent of it on a given day, or in one transaction. The experience of managing such challenges helps children to build financial discipline. It makes their “financial prudence” journey enriching and enjoyable.
Leverage digital avenues
As a parent, you can use digital and mobile-based money management solutions to usher your child into smarter money management. You can give allowances and emergency cash to children instantly using these solutions. You can receive updates on their “expenses” through digital channels via a few clicks on your smartphone.
There can be meaningful conversations with children using the spend data, patterns and analytics offered by digital money management solutions.
Lead by example
Children are likely to pick up habits and behaviors displayed by their parents, so be mindful of how you talk about money around your kids. Think about your purchasing priorities when your kids are around. Are you frugal or free-spending?
Be open with your own financial goals and credit score to help your kids learn the importance of saving money. It is proven that parents who openly discussed finances with their kids were 20% more likely to have kids that say they are smart about money (when compared to parents who didn’t discuss finances) .
Although talking to young children about the concept of credit, debt, and interest can seem intimidating, it’s essential to help them create strong financial habits throughout their life. Starting the conversation early will help them make better money decisions, build a good credit score, and avoid debt.
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