Finances for Children: Teaching Children About Money

As parents, aren’t we always focussed on inculcating good habits in our children? We think about good manners, good hygiene, good routine. We understand that a good habit will hold with the child for a life-time. 

Well, not many parents think about developing good habits with respect to finances. Learning to spend wisely and saving for the future is a habit that can take time to build, even with adults. Here are some tips on how to develop good money habits in your child in an age appropriate manner. 

1. Help them understand opportunity cost: Your child wants a toy, a trendy pair of shoes, a video game all at the same time. What do you do? Help them understand that it is not possible to buy everything with the savings they have. If they spend on the video game, there’s no money left for the toy. 

2. Avoid impulse purchases: Next time when you are shopping at the mall and your daughter has fallen in love with the cute pink frock she sees, teach her that she can buy it using her savings. Encourage her to wait for a day before she buys it. She will likely not find the dress as attractive the next day and may change her mind about it. 

3. Let them earn their pocket money: Don’t make pocket money a norm. When they have to earn the money with simple chores, they understand that money is earned and doesn’t grow on trees. 

4. Stress on the importance of giving: Let them experience the joy of giving. Encourage them to assign a portion of their earnings to be given away to someone in need. 

Teaching children about finances will be a time consuming task. But it can go a long way in helping them manage their money better when they are adults.

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