Kids across the world go to school every morning to learn languages, math, geography, history; but one lesson they never get in the classroom, is without a doubt one of the most important for their future: that is how to handle money and do taxes. Schools and parents as well often don’t talk to kids about managing finances, however, according to financial advisor Ritu Dhodia, children can be taught about money and its value from an early age. Drawing from her experience as a parent she shared that kids learn through observation and recurrence. 'The more frequently you talk about the role money plays in our daily lives. Involving them in small financial matters and turning everyday topics or activities into money lessons also helps. Irrespective of your financial situation, the last thing you want your kids to think is that money is easily available to them. Your child must learn is that money has value, and when you spend it, it’s gone,' she says.
Here are few things you should and shouldn’t do if you want to raise financially smart kids and to make sure that they learn the 'real' math of life.
Start Money Conversations Early
Introduce kids to money as soon as they can count. Have them count change as a way of exposing them to money. Take them grocery shopping, encourage them to read price tags. Explain to them what sale or a discount is.
Kids Are More Likely To Do What You Do Than Do What You Say
Keep your personal materialistic and luxury purchases in check and make sure you don’t give in to your child’s every request. When children are young, always use cash when you're with them rather than credit or debit cards. Cards often confuse children, makes it difficult to grasp the concept of spending and believe that a magic card gets you anything you want.
Be Transparent About Your Financial Situation
It may be an uncomfortable subject but start talking to kids in their pre-teens about money, your financial circumstances. Avoid using blunt statements like 'We can't afford it' or 'We don’t have money'. For a young impressionable mind that says 'we’re poor' and that can lead to confusion and stress. Instead say, 'We choose not to spend our money that way.'
Explain The Difference Between Important Purchases And Materialistic Purchases
Needs Vs Wants – we all struggle with this even as grown adults. Make sure that they know that it’s important not to spend more money than you have.
Give Them A Fixed Allowance
A weekly allowance helps kids to manage their money better. Start smaller amounts, your 12-year-old should not have access to a human ATM. Fix a reasonable allowance according to their age, and avoid exceeding that amount. The main goal is to give them total control over how they use their allowance. Let them budget and learn from their mistakes.
Delayed Gratification Goes A Long Way
Remember how we would wait for our birthday, Christmas or even exams to get over so that our parents would take us down to the store and buy us that toy or book that we have been wanting? This practice teaches kids patience and not to be impulsive buyers that combats the 'buy now, pay later' mentality that can lead to credit card debt. Teach them that just-for-fun purchase come at birthdays and special occasions and will no longer expect them every time you shop.