A report by researchers at the University of Cambridge revealed that a person’s money habits, like most other habits, are supposed to have been formed by age 7. Ironically though, we often consider kids too young to be able to grasp concepts revolving around money and money management is, therefore, often conspicuous by its absence when it comes to parenting. Here are some ways you could initiate your child into the concept of money. Remember to use them on an age appropriate basis though.
- Delay Gratification- The first and perhaps the most important concept to be taught to children is the aspect of delaying gratification, a lesson that adults also often struggle with. The fact that they have to wait to save money before buying something that they want, if drilled now, will serve them well for life. Having the child set a goal and save towards it, can be a good exercise to teach him the value of money. Remember to set them up for success though. Setting a goal that they will never achieve will only work towards frustrating them and not learning the valuable lesson you intend to teach.
- 2 Encourage saving– In a milieu that talks of easy loans and generally promotes consumerism, it will work well to introduce your child to the concept of savings early. If you give your child an allowance, give it in small currency denominations so you can teach the concept of saving a part of the earnings easily.
- 3 Make choices about spending money– Introduce your child to concept of making choices when it comes to spending money. In a time of credit cards, internet banking and online shopping, where children don’t see people use physical money it makes it harder for them to visualize money as being finite. Involving your child in decision making often presents coach-able moments to teach the child about money being limited. While buying groceries, for example, it will help to tell the child of the budget that you have set aside and that you need to decide between products to be able to adhere to the budget. This can also be a good place to introduce the concept of needs and wants.
- 4 Lead by example- Now this one may sound like a tough one, however is also the most crucial. While trying to teach the child concepts of saving and more, you need to also lead by example. Making too many leisure trips to the mall and indulging in a lot of retail therapy every now and then will prove antithetical to the theoretical concepts you are trying to teach. It is important that the child sees you following your own teachings.
- 5 Allow the child to learn from mistakes- The greatest learnings accrue from mistakes. Instead of stepping in each time to micro manage the child’s financial decisions revolving around his or her allowance, allow the child to make their own decisions. Having the child in charge of small amounts will not only give him a sense of responsibility it will also allow him to learn from his own mistakes.
The more you use teachable moments around money, the more the chances of raising a generation that is mindful of the concepts of investing and saving!