Teach Your Kids How To Save Money
Always remember one thing as a parent, it is very important to teach your kids the basic concepts of surviving such as: how to save money, how to never get in a financial crisis, time management and stress management especially when they are heading towards adolescence. Here are some tricks that can help.
Need versus Want
This is a very important concept rather difference that must be taught to kids at an early age itself. Obviously, you cannot expect a toddler to understand the difference but school going children can be explained the importance of this concept with continuous motivation and reinforcement. For instance, they might want a new set of sketch pens when they already have one that is working perfectly fine. However, if half of the older sketch pens have run out of ink or lost, they actually need a new set and then, they may be allowed to buy a new one to their liking.
Before taking your kids on a shopping spree, ask them to make a list of the stuff they require. Always cross-check the list and then take them out shopping. Ask them firmly to stick to the list while shopping. This is the first and most important step on how to save money as if taught this concept in early life, they would not give in to temptations as adults.
A beautiful looking piggy bank will help to inculcate the habit of saving coins and money received as gifts. You can open up this piggy bank every New Year’s Eve and let them count how much they have saved. You can reward them by letting them spend half the money on purchasing things they actually need.
Take Them To Bank
Take your kids to bank and deposit half of the money they have saved in a year in a bank account. Teach them the concept of emergency funds and interest. A savings account or a fixed deposit in their name could be their first step in learning how to save money.
Stick To The Pocket Money Allowance
It is important that kids are taught the idea of budgeting their monthly allowance. This way they not only learn how to save money but be accountable for it too. For instance, they receive INR 1000 as pocket money per month, they have to manage all their personal expenses on treats, buying stationery etc within that money. Also, ask them strictly to write down their expenses on a dairy to figure out how much they have actually spent at a given point in time. Whatever is left at the end of each month can be added up to next month’s pocket money as a bonus!
Here’s our advice to get you started in the direction of teaching kids about interest.
Set Aside A Percent
Each week when you pay your kids their allowance, have them set aside at a certain percent as interest to teach your kids about how interest works. Teaching kids about personal loans, their pros and cons will benefit them to take correct financial decisions in the future. You can also create a loan agreement that includes payback plus interest. Also, show them a personal loan calculator you can refer to websites which have such a calculator. You can show them the compounding interest on a personal loan, how a small sum each month could make a big amount in few years.
How To Expose Credit Cards To Your Kids
It is not a good thing to teach your kids to spend the money that they do not actually have. Credit card bills are nothing but a form of debt. Only spend the available cash when with kids. Be a responsible parent. I know this seems far-fetched in today’s world but maybe we can reduce the number of times we do these impulsive purchases with our credit card in front of them. If you can’t avoid using the credit card, make sure you show them at the end of every month how you are paying the debt you raised from the credit card with your bank account savings, so that they are aware that the credit cards don’t mean endless money source.
Set Good Examples
Let your kids know what you do with your paycheck each month. For instance, it is most important to pay your debts, kid’s tuition fee and bills first followed by buying groceries each month. Thereafter, you can use some portion of shopping on things you and your family members need. Save the rest in a bank. Kids are highly impressionable and they are sure to follow your examples and habits. You are their first role model when it comes to learning how to save money.
Coupons And Memberships
Let your kids know the importance of discount coupons and membership points in different stores that can be redeemed upon consequent shopping.
These are just some of the ways that can be employed to teach your kids how to save money. We sincerely hope, you found these useful.