It is never too late to teach your children good financial habits. The need to teach kids these habits and inculcate the value of money from an early stage has increased enormously due to the constant increase in their wants, which are fueled by the availability of attractive goods and services on easily accessible credit. Thus, teaching them good financial lessons will help them to successfully manage their money and achieving their life's goals, going forward.
Lessons that must be taught:
1. Be a good financial role model: Children learn from what they see and parents are the “first teachers/ Gurus” for them. So we need be very mindful and cautious while making money motivated decisions (saving, spending, investing) when they are around. We become a role model for them by avoiding impulsive buying or buying on credit beyond our means. This will make them understand that there is no such thing as a free lunch and using credit has consequences and must therefore be carefully planned.
2. Teach them about “Inflation”: Inflation is a silent financial killer; make sure that your kids are familiar with this money-shrinking-monster. This can be done in simple ways; perhaps by pointing out to them how school/ tuition fees, or any other costs they are aware of, has risen between the previous and current year. As they are taught to calculate percentage in school, they should be able to figure out the increase in school fees from the last to the current year. Finally, we need to tell them that this increase in cost is nothing but inflation.
3. How to set and achieve goals: You need to set financial goals for your family and involve them in the goal-setting process. For example, if your kid needs a bicycle, teach them how to make it their goal and assist them in forming a plan to achieve it. To accumulate the necessary corpus, you and your child can save a fixed amount every month. This way, it will create a habit of savings in them. Also, give them the opportunity to experiment with small amounts of money and learn from their mistakes while you are still there to guide them.
4. Weigh every choice before executing it: Make them understand that choices are to be made carefully. For example, taking them along on your grocery shopping trips and discuss family expenses – utility services, fees, other recurring and non-recurring expenses - with them; this will give them an idea of how much things cost in reality. Showing them how you plan for these expenses by allocating amounts to each expense head will make them realize that one should never be impulsive with money.
5.Money does not grow on trees: Most of our kids may have a perception that money grows on trees as they see us withdrawing money from the bank's ATM. We need to make them understand that the family breadwinners are working very hard to earn money. This can be taught by giving them allowance / pocket money for doing some basic household chores, etc.
6. Make learning fun: Don't make the whole idea of personal finance serious and boring; that's the surest way to put them off. So, for instance, while you are teaching them the concept of interest, make a deal with them – if they take only part of their weekly allowance from you at the beginning of the week, the balance that remains with you will earn a small amount; on the flipside, if they take an advance, there will be a deduction from the next week's allowance. Then explain how interest works in real life – it will get the message across faster and in a fun way.
There are excellent websites and other online platforms that can teach kids about money in a fun and practical way. There are many games that teach children about managing the money and saving for goals.
Conclusion: Be patient with children while they learn and make learning fun and rewarding; sometimes simply entrusting them with small amounts of money and spending chores makes them feel important and involved. Teaching our kids these good financial habits should make them better money managers in the future; you never know, with the right financial lessons, you may see the rise of another Warren Buffet- one of the world's successful investors - within your family itself.