Teaching a child to be financially responsible

Business

oi-Sunil

By Sunil Fernandes

Published: Monday, January 6, 2014, 8:53 [IST]

Financial responsibility is the need of the hour and so it makes a lot of sense for parents to inculcate the habit in their young children. After all, you reap what you sow and therefore every responsible adult must make sure they make their children financially responsible as well. Begin early so that the children learn in a positive manner as they grow and later on in life if they are faced with a financial crisis, they'll know exactly how to deal with it.

Set a positive example

First and foremost, as a parent, you need to set a positive example for your children. While it is okay to splurge at times, do not make a habit of spending money unnecessarily all the time. If you do this, your child will also pick up the same habit and will spend where not required.

Teach your child the concept of budgeting

Before you start educating your children about financial matters, remember that a young child may not understand terms such as ‘savings', ‘investment', ‘insurance', ‘banking accounts', and so on. As a result, you need to speak to them in words they understand. So tell them that only a certain amount of money is available for a certain product, which can be toys or books or eating out. If the child knows how to add and subtract, give him the figures - the amount of money available and ask him to make a budget of the things that can be purchased with that amount. He can decide whether he wants just one expensive toy or one toy, one book and one meal at a fast food restaurant. This will go a long way in teaching them the value of money.

Make your children earn the money

Inculcate the value of money in your children by making them earn it. The child can earn money by helping around in the house - taking the garbage out in the morning, making his own bed at night, carrying his plate from the table, etc. If the child is older he can clean the car or take the dog for a walk to earn some money. This is a wonderful way to teach your child to be financially responsible as he will know that earning money requires hard work and so the wastage will reduce.

Encourage the children to save money

Saving money is a large part of being financially responsible. So from childhood, if the child knows about this, it will do him a world of good as he grows. Initially you can start by giving him an extra part of his allowance for the specific purpose of saving. Then, when he grows he will automatically continue to save on his own. Open a savings account for him in the post office and let him deposit his money every month.

Do not spoil the children

Every parent wants to provide their children with every possible luxury and in the process end up with children who are spoilt rotten! Do not give into every demand of your child. Make him understand that things are expensive and cannot be bought easily. Have a set allowance every month and tell your child that whatever he needs must be bought with that allowance. Not only will that make him realize the value of money, it will also teach him how to organize and prioritize his finances.
So go ahead and teach your children how to become financially responsible. You can start with children as young as 5 years of age. Always remember that children are like clay and the kind of adults they turn out to be depends on how their parents mould them.

For more articles by Deepak Yohannan, please visit MyInsuranceClub.com

You may contact him directly on Twitter: @dyohannan