Teaching Children About Money Management And Saving
Money is one of the most important commodities in life. While it’s not a spectacular one in itself, what it can do and help one attain is what makes it so vital. Money provides the individuals with freedom and choice to select a lifestyle for themselves. It fulfills not only the basic needs but luxurious wants as well. Those who understand the importance of money are able to enjoy a better control over it. However, teaching the children about money and its importance, to many parents seems like an impossible task. While it may prove to be difficult for the parents who have not worked on it previously it is still attainable as long as they try to explain the same keeping the ‘you’ factor in mind. This means that the parents should communicate in terms of the needs of the children.
Just like any good brand invests time and resources in finding out about the buying behavior of the target market the parents too, should take out time to find out how their children end up spending their money. The parents in the current era can also make use of the online tools and resources in this regard and get a hint from the popular studies that present their findings as graph for a better understanding. Some of the main expenses of the teenagers include but are not limited to:
- Concerts/events etc.
This article will help the parents and their children about money management effectively. One of the foremost things to do is shifting the focus from spending to investing. This helps in teaching a child about the real value of money as it will lead to creating more money in due time. It is important that the children are hammered with the concept of long term value of investment, which they understand comprehensively as this is what will help them in procuring and increasing wealth. They should be taught about the importance of selecting the right financial instruments and invest regularly and persistently for long term.
It is important that parents encourage habits that will help children in disciplining their lifestyle to save and invest. Even if a child is dependent on the monthly allowance, he or she should be taught the simple math for it. The ideal allocation would be spending half of the salary earned or allowance and save forty percent of it. The remaining ten percent of this amount should be given in charity. This is a balanced formula that will help the child in understanding how to make the most of the limited funds to buy stuff they need, to save for any unforeseen expense and at the same time playing their part in lessening the disparity of wealth/income. These habits will help the children in every phase of their lives and help them become more prepared for the money crunches.
One of the best ways for the parents to teach their teens about the importance of money without nagging is by involving them in daily financial tasks. This can include an errand as simple as writing a check to pay for household expenses like the household bills, living cost, balancing a check, withdrawing or depositing cash in a bank etc. This is one of the most effective ways in which the teenagers can be made to learn to become financially responsible and aware of efforts of their parents for earning money. It will also teach them about the market rates of various items and banking standard procedures and will prepare them for the challenges for future.
Every child who is given an allowance or earns as a part time job etc. must be aware of the concept of budgeting. The first step to managing money in an effective manner is budgeting. To help the teenagers or younger children with the concept of budgeting the parents should set one for them in the initial stage. This way they will learn that the amount they spend will directly affect the funds available. It will teach the children how to work around the amount available. To maximize their returns and buy items at best value of money, the children should be taught how to make use of the promotional deals while shopping. In fact these young adults are bound to do better at this since they can find varying deals on products through the use of the World Wide Web easily allowing them to shop more at reduced rates while saving more at the same time.
Every teenager should be aware of the use of credit. The understanding of its set of pros and cons is vital for every teen as it will save them from falling into a debt trap later in their lives. The first step to doing this would be teaching a child about the correct use of the credit cards. In fact the best way to teach them without hammering them about it is cosigning a credit card with a kid and assigning the child with a low credit limit. This way the child will learn through two important things:
- The high cost of minimum payments
- Penalty of late payments
This can also be done with a debit card as the main focus of this drill is to discipline a child and prevent him or her from augmenting their debts that might prove to be difficult to reimburse in the later stages.
While there are thousands of books and other resources available in the real and the virtual world on the subject of money management and saving, for kids of all ages, the best lessons are taught by experiences in real life. Therefore it is the duty of every parent to help their children in realizing the importance of money and its working. This will prepare a child for the challenges that lay ahead for them in their practical life and reduce the risk of them making financial mistakes with drastic consequences. The children who are exposed to such scenarios from an early age learn:
- To have a better control over their finances
- To live within their means efficiently
- To provide for their long term and short term financial goals
- To make the most of the funds available and make them grow