Parenting financial lessons to kids: Why it’s important, and how to do it
Me: What are taxes, and how do I pay them?
School system: Worry not! Mitochondria is the powerhouse of the cell.
All adults can relate to this subtle joke on the school system.
We may have learned plethora of lessons on maths, biology, zoology, but one thing the Indian education system lacks the most is teaching money lessons to kids. The doting Indian parents, who would bring the world to children on one demand, are equally to be blamed that India doesn't have financially aware kids.
Every parent is a role model to his/her child. But several parents think that parenting money values to a pre-schooler or a teenager is premature. But, it is a misconception.
This is how you can explain money lessons to your kids:
Art of investment
Involve kids in financial decisions and let them learn the art of investing. Their involvement in financial decisions will allow them to learn the true meaning of budget and budgeting. This will also help them adjust in a limited budget.
How to make money out of money
Benefits of the power of compounding should be taught to a child in their growing days. For this, parents can discuss with kids why a certain mutual fund or an insurance scheme is being chosen for the family. They should understand the quality of returns these investments bring in the long run. This will make them learn the art of saving for the future and retirement.
Visit to bank branches
Parents may also take along the kids to the bank branches so that they can analyse the process of physical transactions that take place at the bank. Taking them to the bank will help them learn about the value of the money. Today, children think that ATM is an answer to his/her needs and demands. Of course, this is not the case.
Insurance and emergency funds
Insurance plans are the need of the hour and it acts as savings for future. Kids should learn that at an early age. Explaining about contingency fund is also important as to how it helps a person or a family at a time of emergency.
Fruits of insurance and the contingency funds can be explained by showing some examples that is happening at home or in neighbourhood. For example, marriage or any festive occasion or celebration or condition of a family whose bread owner dies without having such an insurance plan that will help his/her family to lead a life of respect.
Difference between needs and desires
Teach your child the difference between need and desire. Tell them that needs are a crucial thing and should be fulfilled at the time of need, but desires can wait. Make them aware that loans in any form, whether direct or indirect, is a curse they should stay away from.
This can be explained simply by adjusting monthly budgets in a good way. Adjust budgets in a way enough money is left in the account on last day of the month, because a child is a good observer and he/she notices all your activities, for example, the pressure on the face while repaying the EMIs of your loans or credit cards.
Don't fight for money in front of a kid
Avoid heated discussions over shortage of money in front of kids, for they might feel insecure. If you don't have an option to avoid them, then have a pleasant discussion on it and try finding out a solution to the problem.
Learn to say no, but avoid saying so every time
A parent should inculcate the habit of saying no to his/her kid at least for one or two demands they have. Every demand need not be fulfilled. However, avoid saying no to every demand of a child because this will make them spendthrift the moment they have money of their own.