“As they grow older, it is important for children to learn new skills. Similarly, it's important to talk to your children about money every day, not just once. A fundamental knowledge of money and finances is essential for kids.”
In today's digital age, it is imperative that parents have a financial conversation with their children. And if you have younger children in the age group of 6-7, they should understand that you buy things with money you earn as they begin figuring out how money works in general. As a result, parents must ensure that their children understand basic concepts such as budgeting, investing, returns, and savings. These words will be useful to our children as they grow.
READ MORE: 5 ways to secure your child’s financial future
Children's attitudes and values toward money are influenced by how their parents spend, borrow, save, share, invest, and protect themselves with money, whether they realise it or not.
Most parents, however, shy away from having these discussions. When it comes to money, it's understandable that parents want to let their children be, but avoiding these discussions can have consequences. If you keep them in the dark about money, they may not be able to make wise financial decisions later in life.
In fact, parents can help their children understand money by allowing them to participate in regular discussions about how to use family income.
Here are tips to help you have conversations on money with your children
READ MORE: 6 reasons why should you teach the mantras of investment to your child
Start with fun games
To assist your child in developing their understanding of money, include some fun maths activities in their games. For example, you could play money games at home or identify different coins, count them together, and teach your child how to make a change. By doing this, your child will learn how to handle cash when the time comes.
Organise cash in a piggy bank
To help children understand abstract concepts, it is important to not only explain the three money principles, but also to provide concrete tools for practice. Rather than just one piggy bank, get three and label them 'spend, ‘save,' and 'give.'
Encourage your child to divide any money he or she receives from you - as allowance, payment for completing a task, birthday money and so on - among the three banks. This exercise will not only help children gain confidence in financial matters, but it will also provide parents with an opportunity to talk to their children about money management.
READ MORE: Start a fixed deposit scheme to secure your child’s future; Here's why
Talk openly about money
Talk openly about money with your children. For example, sit down with your children and explain how much income the family generates and how that income is divided into investments, how much is spent on liabilities, and how much they have in hand to spend on other leisure activities. In this way, money appears natural and financial decisions seem like a team effort rather than something you must hide, or a difficult decision that you’re forced to undertake on your own.
What parents need to pay heed to?
Children, whose parents or caregivers have given them responsibility for spending and saving from a young age, generally have a healthy relationship with money. However, those who do not understand the value of money, on the other hand, turn out to be financially unprepared and will not manage their money wisely. According to studies, children who grew up with a savings account accumulated more savings and had a more diverse portfolio of assets as adults.
The bottom line is that if you as a parent remain open and honest about your family's financial history, your children will also gain knowledge from your experiences, irrespective of whether they are good or bad.
Anup Seth is the Chief Distribution Officer at Edelweiss Tokio Life Insurance