How Do I Teach My Child Financial Planning?

Schools teach only a few basic life skills. Financial literacy is not a part of the school’s curriculum. But, financial planning is a necessary life skill for every child. So, parents should start teaching their kids money management from a young age. 96% of parents feel that their children don’t have financial literacy. To teach financial skills, parents should talk with their children about making, spending, and saving money.

There are age-appropriate activities to teach your kids the value of work and money. Teaching them budget and savings will help them understand the benefits. They must know how to manage their finances in the digital world. 

Financial Responsibility – Why is it Important For Kids?

93% of teens in India are interested in digital payments. Yet, only 22% of those are confident about using it. Modern teens are self-opinionated and independent. Empower them with financial literacy to help them manage finances in a better way. Newer investment methods are available now, and today’s youth are more interested in crypto assets. 

Teaching financial planning right from a young age is important because it helps in:

• Understanding financial health
• Realising the importance of budgeting
• Instilling saving habits
• Avoid impulse shopping
• Planning before spending
• Knowing the rewards of a financially secure future

Age-Appropriate Tips To Teach Financial Planning To Kids

Experts say that you can teach your young child financial planning when they can start asking what they want. Children as young as one-year-old are capable of making simple decisions. Hence, teaching financial responsibility should begin at the preschool stage. Simple activities in everyday life will help them learn about money and its importance. 

Pre-Schoolers And Elementary Kids (7 And Under)

Talk About Money

Pre-schoolers understand the world around them by observing. Include money conversations in your household to teach financial skills. It is not good to scare your children with conversations about debt. Share your enthusiasm for savings and bargains. The important phrases to teach financial skills to preschool kids are share, save, and choose. 

Shop With Children

Take your children shopping. Talk to them about discounts, deals, and how you can save money by choosing products from the sales rack. It will help them understand pricing and value. During checkout, encourage them to give cash at the counter and get the change back. Using real money instead of cards will help them understand that money is a tangible entity. 

Start a Savings Account

Kids are always excited about piggy banks. Encourage them to put more money into the piggy bank to get their favourite toy. You should also start a savings account in the name of your children. Whenever your kids receive a large amount of money during the holidays, ask them to deposit it in their bank account. 

Include Math Games

Playing grocery shopping, restaurant games, etc., at home will be interesting and educational for your child. Encourage your children to exchange fake money for goods and services. It will help them understand money exchange in the real world. When your kids are a little bigger, play math games. Give them a simple calculator to add and subtract numbers. Many apps are now available to teach maths to young kids. 

Older Kids And Teens (8-12)

Encourage Them to Use Their Skills To Earn

Older elementary kids can start making some money using their skills. Experts suggest that you don’t pay your kids for their chores. Instead, make them work outside the home and earn money, even if it is very small. 

For pet-loving kids, show them they can walk their neighbours’ dogs and get paid for it. If your kids enjoy crafting, they can make something and sell it to friends and family. 

Work with them to create a small business plan. Teach them how to add the cost of supply and work hours to fix the price of their product. If they are using skills like raking snow, dog walking, etc., they can also learn about pricing non-tangible entities. 

Talk to them about your job and how it helps turn your skills into money. When they see you excited about your job, they will become interested in making money. 

Talk More About Spending

When your kids have saved enough in their piggy bank, they will want to discuss using it. Encourage them to find a good use for their savings. Use positive reinforcement to help them understand whether they are making good use of their money. They can splurge on sweets, buy a new video game, or buy something they have always wanted. 

Teach them about needs and indulgences by making them understand the consequences of their choices. If your child wants to buy a toy that was not budgeted, let them know that it will come out of their savings. 

Inculcate Philanthropy

Talk to your child about donations and how they can help the less fortunate. Encourage your child to donate. Let them give away a portion of their savings for a charitable cause. It will teach them to spend money for the benefit of others. 

Teens And Older Kids (13+)

Use Apps to Track Money

Older kids have bigger allowances. They need to know the right way to budget and spend. Apps are available to track debit cards and wallets. Parents can make direct deposits on debit cards that their children can use to spend. The tracking app will help them understand where their money went. However, providing a credit card for teens is not a good idea unless they earn to make their credit card payments. 

Talk More About Spending And Saving

Communication is the key to imparting financial planning knowledge to teens. Talk to them about controlling spending when going out with friends or on dates. Show your kids that you have been saving up for their college funds since their birth. Encourage your kids to research ways to pay for college. Enrol them in scholarships wherever applicable. Your kids should also learn that their education has a financial impact on you. Introduce them to investments. Provide them with the knowledge to choose stocks and track their value. 

Conclusion

India has great potential to be one of the top financially literate countries in the upcoming years. The country has 27.6% of people in the prime age group of 25-44, which can go up by 20%. Parents have a huge responsibility to help them learn about financial planning. 

If youngsters have a good financial education, it can increase their standard of living and improve the country’s economic growth. A financially savvy population will have a positive global influence. 

To learn more about financial planning for kids, visit Piramal Finance to access guides, tips, and tools.