As children grow, they come to know what money is by observing us buying toys and chocolates for them by giving the shopkeeper that coloured paper called ‘money’. While they begin to understand that to buy anything we have to give money, it’s equally important to make them realise that they can’t buy everything they want to, or that everything is not worth buying.
Let’s look at some ways in which we can encourage our children to understand the concept of budgeting, saving, and investing.
Inculcate habit of saving
Most of us have maintained a piggy bank in our childhood. This is the most primary, but effective, way of teaching a kid the importance of saving money. I remember how on certain occasions when my elders would give me cash gifts, my mother would keep them in a box. Then, at the end of every year, she would show me all the money that I had saved. Then, we would sit and discuss how and where we would spend that money. So, the first thing to do is to get your child a piggy bank.
Ask your child to put a part of his allowance in that piggy bank regularly. This will inculcate the habit of saving in him as he will see the money grow in the piggy bank with every rupee he adds. Taking my own example, my niece too has a piggy bank and to ensure that she saves more, my sister has offered this idea to her that for every penny she puts into the piggy bank, my sister would add one too. This way, my niece now prefers to save more. Also, talk to your kid about the benefits of saving money and how each penny saved today can grow into a rupee tomorrow.
Involve your kid while discussing finances
It won’t be a bad idea to involve kids while chalking out family’s monthly finances. It could indeed be an effective tool to help them understand the importance of money and planning before spending. Most often than not, kids learn about money management and develop their spending habit from parents. Hence, an open discussion with regards to tackling monthly expenses would help them understand the prudent way of spending money. You could, in fact, sit down with your child and discuss the ways in which he could spend his pocket money. This will not only help him understand that