Why Is It Important to Teach Finance to Kids?
Money, Money, Money….. In this big, bad world.
We have mostly grown up listening to our parents tell us, ‘You don’t value money,’ and/or ‘Paison ki kadar karna seekho’ (learn to respect money). Some prevalent parental traits that we have been party to observe right from a very young age.
The constant badgering, especially if you come from a middle-class family, is about money. We were told umpteen things related to money but what so many of our folks failed to teach us was- the value of money.
Okay, here I certainly do not mean to convey the conversion value of USD and INR 😐, but more inclined towards the meaning of having money, using it wisely, and saving it.
As parents, we tend to give in to their demands more often than not. We often fail to educate them about specific, fundamental terms ‘money,’ ‘finance,’ ‘spending,’ or ‘saving.’
Kids learn a lot from their surroundings and us (as parents). They have a knack for seeing things through and observing, even when we think they don’t. It is essential to teach kids financial reasoning from a young age to help them make informed decisions while growing up.
What is money reasoning?
The art of earning and spending money is called money reasoning, in simple language. This is an indicator of how we understand, use, earn, and spend money every day. It teaches us to become more aware of money and its importance.
Not everything can be taught in school, and financial advice is one of them. If we go back all the way to our school days, I don’t think our teachers taught us ‘how to spend money’ or ‘how to earn it.’
It is something that we learned along the way. Teachers are the torchbearers, definitely, but there are many things that parents need to teach from a young age.
Raising a financially responsible kid is a boon in so many ways. In addition to teaching them about money, we also consider the benefits of helping them grow along the way. It will help them become more financially independent, make rational choices, avoid debts, learn personal responsibility, and add to their self-confidence.
Wouldn’t it just be magic?
So, what do we do? or how do we do it?
Talk about money
For kids to understand money, you need to talk to them about it. Just telling them that a particular item is out of reach or does not fit our budget is not enough. Having a small chat with kids about how the month works, what type of expenses we incur during the month, any bills, rent, or funds that we invest in, help us make them understand the cost of living.
When our kids show an interest in learning about money, we need to answer it as practically as possible. We want to teach them about money, and give them a positive experience with money, and not make them worry about it.
So it’s good to maintain a neutral tone while speaking with them rather than getting overexcited or over-emotional. If you want to converse with kids, you need to get them involved at the grassroots level.
Teach them about Earning money
I guess a lot of us have grown up with the concept of ‘pocket money.’ As a kid, I used to get a fixed amount every month from my parents to spend during the month. It wasn’t big, but it gave me a sense of satisfaction to buy my favourite pencil or chocolate, which cost about Rs. 2 to Rs. 5.
Sometimes it also helped me buy a ‘samosa’ from the school canteen. 😉
This pocket money, may be free, but it was all I had to spend during the month. My friends enjoyed better pocket money as they got to earn more too. Doing some regular chores around the house or running errands for parents or doing an assignment for another kid made them money.
They made their way by doing small things while they were growing up. It gave me a lot of hope to earn my way, so I enrolled in teaching in school summer camps, where we were awarded small amounts to help around or teach some vocational stuff to young kids.
If we don’t earn it, we will never learn it.
Teaching kids the importance of earning money to spend is probably one of the wisest decisions you can make.
- Draw a monthly chart of things that will earn them money and something that will not.
- Dusting the house, helping with the laundry, arranging their bookshelf, tidying up the bed, etc., can help them earn some brownie points and items that you get your kids to help around with. This will not only make them more responsible towards that chore, but it will also imbibe a sense of ‘earning a living’ and ‘staying clutter-free.’
Let them ‘boss up’ and get their entrepreneurial hats out. You will be surprised by their potential.
Teach them to save
Saving money = Earning it.
In the process of teaching them to earn money, we often overlook the ‘spending’ aspect.
There is nothing as too much saving; however, it is important to teach your kids to spend responsibly.
My kids have a money-box with a password on it. They keep adding any loose change they find around or any money given during ‘Kanjak’ or ‘Navratri’ puja. So far, both of them have a sizeable amount to spend.
Every time they earn something or someone gifts them something, they promptly add it to their money box. This is one step in teaching them the importance of saving money.
If you have a bank account, try to take them to the bank and teach them ‘how to deposit’ money in their account. Seeing is believing, and a visit to the bank can benefit your kids’ immensely and turn out to be fun as well.
From mutual funds to fixed deposits, taking small steps to ensure your kids’ financial well-being and giving them the exposure to understand this will help them save wisely.
Teach them to spend
If the kids step out of the house, they have the freedom to go with their friends and spend some amount on buying chips, juice, or chocolate. They have a limit of carrying only Rs. 50, and that too, not every day.
At first, my kids were not very comfortable spending ‘their’ hard-earned money 🤷♂️ buying something they wanted to eat. But slowly, once their friend started doing it, they understood using the money they have to buy something they want.
Sometimes it takes one person to show something you want to show.
While it is important to earn and save money, you also need to teach them how to spend it wisely and responsibly.
Take them grocery shopping or to local markets whenever you go. Making them an active part of your grocery shopping or bargaining will make them more accountable and responsible. They may not understand it immediately, but taking them out regularly will help them in understanding how you spend money.
It is important to remember not to ultimately succumb to all their desires at all times. Kids want a thousand things every day, but that does not mean you buy everything they want.
We have a policy of shortlisting items from different places to get the best price. Our kids know this, and we ensure that we don’t buy impulsively, even if we really love it. Be it offline or online, there is always demarcation while purchasing anything. This is a virtue that we have passed to our kids as well and now they also check the pricing of things before purchasing them or asking us to buy them.
To conclude (and continue…)
Create a learning environment for kids to understand the cycle of ‘earn — save — spend.’ We may not have gone through it, but passing on this virtue at an early age will do nothing but benefit your kid.
Teaching finance is an on-going process that needs to be given many times along the way. (O, what the heck! We also need a sounding off by someone wiser than us, don’t you think so?🙄)
Rome took a long time to get built, and kids will surely not learn ‘how to handle money like a pro’ in a day too. It is important to impress upon kids that money does not make you good or bad. It is what you choose to do with it that makes all the difference.
Money is just like a screwdriver- give it to a mason, and he will know how to tighten the screw. But give it to a kid; it may not pan out well.
It is not always about the tools, but at what stage you use them, that matters.
Happy Parenting to You!
(The article was originally published on https://bit.ly/3opCRWX)