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Parents take great pains to educate and arm their children with knowledge. However, most parents are likely to negate teaching kids about money altogether.
Most parents limit their children’s interaction with money and finances to increasing their allowance as they grow older. In fact, in India, even older children are kept in the dark about the status of family finances – the thought behind it is – so that children do not grow up with a sense of insecurity, especially if the family is struggling.
However, this sort of financial illiteracy can be damaging, making either children averse to money management as adults or lulling them into a false sense of security that money is only to be spent, and not saved.
At what age should then children be introduced to the concept of money? And, more importantly, in what context?
It is crucial that we start sensitizing children to the concept of money (how to distinguish different kinds of coins, describing a currency note, etc.) from the time they are toddlers.
Once children reach primary school, they should be introduced to their own basic allowance and given piggy banks or rewards for doing household chores. At this stage, children can be sent to nearby stores to make one or two small purchases alone as well.
A lot of children at this stage of life are unreasonably demanding and might often want toys that they end up never playing with. At times such as these, it is important to tell them that it is impossible to understand the relevance of money and that one extravagant purchase can buy them multiple goodies.
Another important but indirect way of teaching kids about money is by sharing the importance of giving money and sharing with those less fortunate than themselves.
Once children reach adolescence, it is a good idea to introduce them to banking and the concept of ‘organised money’ and interest. It is a good suggestion to open Savings Accounts for your children individually.
All top banks today have customized accounts and special offerings for their junior customers with Debit Cards and linkage of parent accounts to children’s for easier transfer and even parental consent guidelines for larger transactions.
Most importantly, you should add your teenagers as nominees to all your accounts and financial schemes thereby impressing on them the relevance of preservation of money and the notion of transferring money.
Once your teenagers move towards high school, you must discuss details of any special schemes you have taken in Insurance or mutual funds specially planned for kids. Though they need not understand the specific technicalities, the awareness of financial planning and commitment makes children both empathize with financial responsibility and make them aware that they have a safety net to pursue their dreams.
Teenagers should also be encouraged to pay their fees, get demand drafts made and encash cheques.
These tasks alert adolescents, especially of the reckless sort, that money is not just meant for spending.
Though these little nuggets of wisdom are enough, you can also encourage your child to maintain a diary or track expenses via an app. You should encourage children to record these details without showing curiosity in peeping into their personal lives.
Children like to be trusted and being trusted with money reasserts a positive relationship with their parents. As children grow up, there might be several incidents where they have lent money to friends injudiciously or misused their allowance to buy cigarettes or narcotics.
These incidents or other unsavory incidences such as theft of cash and belongings can often upset parents greatly causing them to break out in anger and be harsh towards their children.
Though it is valid to be upset in such cases, but punishing your children dramatically in such cases might alienate them further and cause them to hide incidences. It is important to broach such topics with delicacy and care, letting children share their impulses and thoughts behind motivated them.
Teaching kids about money is as much about empowering them to take financial decisions as it is about inculcating in them a sense of responsibility.
There is a strong chance that children might be disinterested in your endeavor to teach them about money, the best chances in such cases is to gamify the experience and introduce them to these concepts by letting them take summer jobs for a little stipend or encouraging them to play board games such as Monopoly.
Of course, in certain scenarios, you will have to set your foot down such as when children take loans from their friends.
But, by and large, teaching kids about money is a fun-filled ride which you can use to deepen your relationship with your child.
The good thing is that financial management is less fraught with ambiguity as compared to sex education and religious discussions, but can have a profound effect on your children’s life and consequently, on your life!
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Lover of good books and great conversation. I run a podcast called India Booked. Personal
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