As parents, teaching a child about financial management in their younger days helps them to manage their own money well in the future. The importance of teaching someone to manage their finances lies in the hands of parents. And starting young is the key to manage it well.
Although most parents provide their children with pocket money when they are in High School…they miss the importance of training them to spend on important things and not unnecessary material things. Furthermore, parents don’t usually train their children to make any invests or have savings when they are young.
If you are a parent and if your child’s financial management issues play on your mind then the following points might help you to teach them how to budget their expenses smartly.
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Tell them to list their needs
If your child is still living with you then most of their basic needs like food, housing, supplies are already catered for. So, whatever little money your child gets as pocket money or through their part time jobs should largely be enough for them to survive.
It is at this stage that parents should talk to children about separating their needs from their wants. Children tend to get carried away but material things their peers have / own and end up spending money on things that aren’t important. Instill in your child the habit of differentiating between the two areas so they spend smartly.
Teach them to save for the bigger picture
Children need to learn to save from a young age. Talk to them about how beneficial having some savings can be for their own future. Site examples from your own life. Tell them how you had to save up for a car / house / other big expenses and teach them how savings play an essential part in the future of any person.
Talk to them about investments
Who doesn’t like earning that little extra bit every now and then? If your child is well versed with the various investment schemes out there then ideally speaking, they would definitely like to double their money with its help. Teach your child about all the fruitful investment options in the finance world. This will help them to budget their money.
Teach them to make “categories” of expenses and budgets for each
Help your child to budget themselves by teaching them to make categories of expenses and budgets for each. For example: let them divide their list as per “miscellaneous”, “outings”, “travel” etc and then specify an expense limit for each. At the end of each month they can compare to see if they really managed to stay within the limit laid down or not.
Let them enact a field example by maintaining themselves for a month
Pick a month in which you tell your child to shop and maintain themselves and all their needs from food to outings to traveling. Whatever their income in way of pocket money or a part time job is would be their provider. Make sure you specify a certain percentage as a “must have” saving at the end of it too. This will help them to live within their means and understand the value of money too.
Teach them the value of every single penny
The problem with spendthrift children is their inability to understand the real value of a penny. Take them to a homeless shelter and then a construction site where hourly wage laborers work hard to earn their daily bread. This will instill in them the value of a single dollar and they will learn to respect any money they come across because they will know the sweat that went behind earning it.