A child comes with a lot of responsibilities for parents. All parents strive to give the best to their children and secure their child’s futures. Planning your child’s future well in advance will prepare you for many stages of your life. One way of doing this is to teach your child about money and its importance.

There are a lot of good reasons to teach your kids about money. For one, you don’t want your children repeating your own financial mistakes. Also, if you raise financially shrewd adults, chances are they won’t someday be asking you for money. By helping them, you’re helping yourself. Please find below some tips to do this.

Introduce Them To The Magic of Compound Interest

As a parent, you teach your children to take care of their physical and emotional health. It only makes sense to teach them to take care of their financial health as well. Whether you are saving or borrowing money, compound interest plays a significant part in your financial health.

When your children have a savings goal in mind, they will need a place to stash their cash. For younger kids, this may be a piggy bank. Use a clear jar to save. The idea of a clear jar is to see the money growing. Yesterday, they had one hundred rupees. Today, they have one hundred rupees and added ten rupees. Making them understand the power of compounding.

If they are a little older, you may want to set them up with their own savings account at a bank. That way they can see how their savings are adding up and how much progress they are making toward their goal.

With young kids, though, you will have more luck teaching them to save for short-term goals—such as a toy they want—rather than for the future

Tracking the expenses

Being a better saver means knowing where your money is going. If your children get an allowance, having them write down their expenses each day and add them up at the end of the week can be an eye-opening experience. Encourage them to think about how they are spending and how much faster they could reach their savings goal if they were to change their spending patterns.

Leave Room for Mistakes

Putting kids in control of their own money is letting them learn from their errors. It is tempting to step in and steer kids away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment. That way they will know in the future what not to do with their cash.

Teaching kids about money, including how to save and spend wisely, can set them up for long-term success.

Teach Them to Budget

Teaching children how to budget at a young age will be helpful for them later in life. Sit down with older kids and talk about what a budget is and what categories it has, like fixed living costs, debt repayments, groceries, transportation, and entertainment. Work with them to develop their budgets and help them understand the consequences of going over their budget. This will help them learn to prioritize needs over wants and how to set long-term goals for big-ticket purchases. Also, teaching them about the difference between needs and wants is important. A need is something a person needs to live or thrive. A want is something enjoyable but not necessary. Sometimes, children can have a challenging time distinguishing between these categories.

Talk about Money

The best way parents can teach their children good financial habits is by discussing the money decisions that they make. Discuss your thinking on spending and saving with your kids.

Talking about money should include your family’s views on the best ways to use money. Explain to them that saving is important to you because, for example, it helped you pay for your college education or buy your home. If you strive to live on a budget and without debt, talk about how spending only what you earn helps you worry less and enjoy the money you have.

Talk about the concept of “Save, Share and Spend.” It is a method for children where they set aside money toward each of these three things.

 

Financial literacy helps children learn decision-making skills. As children decide how to save and spend money, they will be able to make thoughtful decisions about money and other life situations. Starting this process early helps set the foundation for smart financial decisions in the future.

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