28 July 2011

How to Educate your kids on value of money?

Teaching kids about money is a controversial thing. You would not want your money worries to be passed down to our kids. You approach the subject of money in a pragmatic way which will help to enable your kids in their future. Kids know how to get their things by crying or whining. But when your 11 year old kid is asking you for an IMAC laptop. What do you do? You definitely draw a line and say it's not possible. Rather than providing them money why don't you educate your kids about money.

Before you could begin with this, try and place yourself in your child's shoes. Try to remember what your top financial concerns and priorities were at that age. Then get to know about their thoughts on money. It gives your kid a feeling that you are interested in their opinion and this will help make financial conversations more productive. One of the best ways to teach a child, even a young child, about the value of money is to allow them to have and control their own.

Follow these guidelines to teach your kids on money

Let them control the money
If your kid doesn't have control of money before adulthood, they will feel that money will always be provided to them. By doing so you making them responsible for spending money in future. Over the period of time they will learn how to spend money carefully.

Take your kid along with you when you are shopping for a toy or a dress for her/him by fixing an amount you will spend for shopping. Ask him to choose an item inside the budget. When he/she picks an item, try to tell them how worth it is to spend on that particular item. Give them an option to choose a high priced single item vs multiple items for low price. Also when they come to the cash counter, let them handle the paying part. By giving the flexibility for your child to choose, but with a specific amount you are making him/her a responsible buyer. By asking them to pay at the counter, they will learn to take ownership and also learn to handle cash in hand.

This will help them to make decisions, through trial and error. It's good they learn this at a young age.

Teach them the value of earning
When your child asks for money, don't just pull it from the purse and give them. Give them a small goal to achieve to earn that money. Simple things like making the room to help you in the kitchen or watering the plans will instill in them the value of earning.

Saving money
The demand of a kid is always high. They'll want to buy something larger than the amount they have on hand. In such cases teach your kid of saving money for an objective. Piggy banks are a good way to start. It boosts your kid when they notice their savings have increased. They will realize that by increasing their savings they can attain their goals quickly. This will also help him to avoid impulsive buying.

How to plan Savings
It's good if your kid learns the importance of saving and makes this as a habit. Next will be to teach him how to save money and invest for different purpose. You could divide his saving for example, Rs. 50 for birthday gift, Rs. 80 for weekend picnic. In this way your kid will learn to invest for different purpose and he will learn how to plan in his saving at an early age.

Use creative methods
You could creative ways to teach your kids about money make them financially prepared to deal with the real world. Use educational and interactive board games, get tighter with your kids and have a brain storming session on how you could make more money, try and include your children into bill pay, watch news with your kid, after a certain age instead of gifting your kids with story books, give educational money books as gifts, incorporate your children into your financial and investing life.

Involve children in household budget
Try and involve your kids in the household budget. e.g. discuss your budget to invite guests in their birthday party, or if they want new writing table for their room then they have to avoid their games or toys etc for sometime. So that children could learn to adjust themselves according to household social circumstance.