As a parent, you always strive to give your kids the best, and that is understandable. But in trying to provide them with all that they need, we seem to forget to educate them about the basics of money. Knowing how money works and the key elements of finance will definitely help your child build a strong financial background when they grow up.
It is your responsibility to create a learning opportunity for your kids and teach them money management. A good practice is to create situations and ask your kids to participate. This will be a fun act without making money management a boring prep talk.
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In this article, we will look at three basic pillars of finance and how you can share the knowledge with your kids.
Budgeting
You might say budgeting is only possible when you have an income. Yes, that is true. But it is equally important to know the art of budgeting to ensure that when money comes your way, you know how to use it properly.
Spend some time with your child to figure out their requirements and help them to create a budget so they can contribute to their purchase. This will give them an idea of what they need to cut so as to provide for something. Also, they will have an idea of the time it takes to actually save for something, rather than just going ahead and buying it and disturbing the entire budget.
Teach them how they can divide their pocket money and save a portion of it for a future purchase and use the rest. You can also share your household budget with them and explain how you allocate funds for wants and needs. Ask them to share their views on how to improve the monthly budget. It will motivate them and it will be fun.
Savings
The first thing you need to do is to create opportunities for your kids to earn some pocket money. Ask them to take up household work and in return, provide an allowance. There will also be other opportunities where they can earn some cash.
Once they have the basic amount in their hand, you can teach them the basics of saving. You can help them to create a goal and teach them how they can save for it. A good option is to open a savings account, and whatever money your child is able to save, you can put it in that account.
A digital savings bank account will be an ideal choice, where you have the liberty to maintain whatever you can without the need to keep a specific amount in the account every month. A digital savings account is easy to handle and can be opened from the comfort of your home.
You can also help them identify needs and wants and how they should use their money to address both in a balanced way.
Borrowing
Responsible borrowing is an important lesson, and it is best if you share it with your kids. It will help them through college life and when they grow up to become the bread earners of their family. Talk about responsible credit decisions and how it will help them to keep their financial ship sailing.
You should help them to understand how credit works and the disadvantages of excess credit exposure.
Conclusion
Explaining money will take time and effort on your part, but it will be worthwhile. Don’t be discouraged if they are not as excited to learn about it as much as you are to share your knowledge. Try and make it a fun activity where there will be a reward after every achievement. A slow and steady approach will pay off, and your kids will definitely appreciate your efforts in the long run.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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