Inculcating the habit of financial planning from a young age enables children to be money smart. Parents should familiarize their children with the basics of prudent financial planning. By doing so, children will grow into financially independent individuals over the long run.
To start with, children can be taught how to save a small sum of money and watch it grow by investing it smartly. This is a good start to give children a sense of financial ownership as well.
Let’s discuss some simple yet effective ways to reach this goal:
1. Inculcate a habit of saving
Children learn from their elders. Your child’s perception about expenditure and saving depends on how you inspire them. Hence, it’s necessary to teach them the importance of savings.
Many other factors are involved - the timing of purchase, utility, and then, cost. These will teach them prudent decision-making regarding spending and, thus, saving. Saving teaches a lot for the long run, being in control, for instance. It makes an individual financially secure and independent.
2. Money is earned - create earning opportunities
When children realize the need to earn for whatever they wish to purchase, they find a direction. It fosters decision making from an early stage. Monetary rewards in exchange for small tasks around the house will make them responsible financially. It makes them understand the critical aspect of money earned through hard work. Wishing to purchase a toy or a gadget, which is way out of their budget, will make them more responsible.
3. Teach the value of giving
The principle of ‘save, spend, and give’ is a great concept to make your child learn the value of money. The money earned by them through gifts or allowances can be split into three separate piggy banks - Save, Spend and Give.
Saving for any game, or hobby goes to the ‘Save’ box. Money kept for daily expenses can be kept in ‘Spend’. The fund intended to be used for gifting or donations can be deposited in the ‘Give’ box. Such practices will instill decision-making, budgeting, and judicious saving habits in your child, who will grow up to be financially disciplined.
4. Practice financial discipline
At home, you can involve your child in the family’s monthly budget, or to plan finances for a vacation or festivals. You may jointly draw a plan and invite their suggestions on expenses and cost-saving efforts. This will not only boost their decision-making confidence but also give them an idea about the family’s financial capability.
5. Give them control and ownership
You can give them monetary rewards at regular intervals, on occasions, such as birthdays or festivals, or as an award for achievements in academics, sports or any other activity. You can ask them to spend the money as they desire to. This will give them a sense of responsibility and ownership.
6. Teach them how money can grow
Saving money is one part of being financially sorted. The other significant part is investing it in avenues that will boost your wealth over the long run.
If you are buying a child plan, involve your child in the decision-making process. Share the objective behind this investment, and ask your child to contribute as well. Explain why it is essential to save adequately for the future, and how it may cover you and the family as a security net. Ask your child to contribute a sum, however small it may be, from their allowance, towards the plan. When you track the progress of your investment, discuss the progress with your child. This will help children understand how to save money and find ways to boost wealth through the right investment choices.
These small but significant steps at home will go a long way in making your child money-smart.
So, what are you waiting for? Select a child plan with a good sum assured and start investing today. Discuss the need and significance of the investment with your child at regular intervals. Engaging your child in planning your budget and investment decisions will make them financially disciplined. As far as the child plan goes, make us a part of your investment journey. You can get more details here. Our trained and trusted financial advice experts will guide you with the plans that best suit your needs.