If you were to ask any parent what they would like to teach their 6-year old kids; what could be the typical answers? Most would emphasize on morals and values, some would emphasize on importance of education, others would focus on life principles and relationships, and the list could go on. But rarely would you come across parents who really want to talk to their children about the need to save, about the merits of thrift, or the need to be financially savvy at a young age. In most India families money is normally dealt by parents and the elders of the family and children are just taught to administer money. That is exactly where the thought process needs to change.
Teaching kids about money is not only important but it is something no parent must shy away from. Of course, there are serious ways to teach them about money and their fun ways to teach money skills to your kids. As a doting parent you must adopt the method that really appeals to them and leaves a lasting impression in their minds. The bottom-line is that Indian children need to become more money conscious at an early age. So, how to teach your child value of money? What are the typical financial mantras that you should teach your kids at the age of 6?
1. Teach them the importance of saving
That is something most children do not focus; largely because their parents do not focus them on that. Buy a piggy bank for your kid and teach them how to operate a bank account. Of course, you will still accompany them but they need to understand the value of money and the power of savings at an early age. Use live examples and videos which are abundantly available on the internet to drive these points across.
2. Teach them to be meticulous with inflows and outflows
When your kid is 6 years old you must allow them to go to the stationary shop or the grocer and make small purchases. The idea is to teach them to handle money. They should be meticulous about how much they have paid and how much they need to collect from the shopkeeper. This not only makes them savvy but also builds their financial confidence.
3. Show them how patience grows money over a period of time
You may believe that 6 is too early an age to learn about investing but your kids are actually sharper than you can imagine. They need to understand the value of patience and giving them lessons on investment can be a good way of teaching them the value of patience. They also need to understand that conservatism and risk taking are rewarded in the long run. That will appropriately mould their financial thinking as they grow.
4. Teach them about taxes and how to be tax efficient
They may be too young to understand about taxes but explain to them why taxes are paid. You surely want your kids to grow up to be responsible taxpaying citizens. That is only possible if you instil in them the importance of paying your taxes at an early age. Also explain how you benefit from the taxes paid. Also explain to them that there are legitimate ways to reduce your taxes which can also help you grow your wealth.
5. How to use and account for their allowances
You are surely giving your kids pocket money, but how are they managing it? Most likely they just come and ask you for more whenever they have exhausted and you must be obliging them. That is not the right approach. In fact, put them into the habit of writing down their expenses and maintain a record of their flows. When they come to ask for more money sit down with them and discuss on how the money was spent and also suggest them proactive ways of using the funds better. Believe me; they will appreciate these inputs from you.
6. Teach them that debt is a double edged sword
The urge to borrow starts at a very young age. Explain to them that borrowing without a purpose is not acceptable. They need to learn at an early age about the importance of commitment and to stick to their commitments. Teach them that debt is a commitment and therefore has to be taken on very selectively. The more they understand about the nuances of debt the less likely they are to put themselves in a debt trap at a later stage.
7. Show them the importance of budgeting and monitoring
When they come to you for their monthly pocket money, ask your kids to prepare a budget. Let them find out how much things cost and how they need to manage finances. Tell them that your allocation is limited and therefore they will have to prepare a budget if they want more pocket money. That will force meticulousness in your kids. Also teach them the power of monitoring their expenses during the month. They will learn some of the most important lessons of finance through these simple role plays.
8. Teach them how technology has changed the face of money
Technology has changed the face of money and finance in the last 20 years and the next 20 years could see sweeping changes. Get your kids comfortable with using ATMs and online security. Let them learn the nuances of payment banks, NEFT, RTGS, IMPS and UPI payments. You will be surprised that they are a lot more comfortable with technology than you can imagine.
The crux of the matter is that you need to instil the financial sense into your kids at an early stage. This will ensure that they will become a lot more pragmatic and savvy in managing their finances as they grow up!