As you run behind your little son or daughter and try getting them to sit still and study, you can't help but feel the background score of your life being Pink Floyd's cult anthem - 'Another brick in the wall'. The song you grew up on as a rebel rings clearer now as your child desists from learning things! But along with teaching your child daily etiquette, educational subjects and other things, another very important factor remains teaching your child the importance of money and savings.
They say - money doesn't grow on trees. But if it did the only way to see it bear fruit would be by letting it grow and not pulling it off the trees and spending it unwisely! This is a basic concept which we as adults understand and we should try explaining to our kids, so they understand the value of money. In this issue of Women's Weekly we give to you reasons why inculcating the value of money and the importance of savings and investing to your kids in a simple and fun way, is essential for them!
Set aside time
Just as you set aside time to study, time to play, time to nap, start by setting aside some time per week to spend with your child where in you can start explaining the concept of money. Spend this time wisely, by being interactive and getting them to ask questions about money. The more fun you make it for your children, the keener they are to learn and retain these teachings! You can get them to make their own money by using paper and paints, which they can use to buy things in the kitchen like an extra cookie after dinner, or if they are of a slightly older age to do some simple household chores, then show them how by doing simple things like making beds they can earn some play money just as you earn money!
Savings before spending
Once your child is clear on the concept of money, you should introduce to him or her the concept of savings. The best way to do this is by giving them a piggy bank! Show them how they should store all the money they receive into this little magic box which when full and opened gives them far greater amounts. If your child is slightly older, you can even set a date to go open a savings bank account with them and explain how it works, and show them that all the money they save every month in their piggy banks, will go into the bigger bank which will get added together every month. After all, a bank is like a bigger piggy bank isn't it? Once they have seen how the quantity of money increases by savings, they would rarely be enticed into spending it elsewhere!
Going for goals
You might think your child is too young to start setting goals, but think again! The financial goals you set for your child are different from what they as children desire for themselves. Little kids can only think of toy planes, remote controlled racing cars and kitchen sets or expensive dolls, whilst you as the parent think of their college education, marriage, first car etc. Yet just because their goals for themselves are different does not mean we should neglect them. On the contrary it is best if we ask our kids to identify what they want and get them to plan to buy it. This method reinforces the concept of savings and also strengthens the child's inherent independence. And how do we achieve this? You can make this a fun activity by getting them to draw out what they want for this year (short-term goal) and something they would want within 5 years (long-term goal), and using some basic math help them understand the price and how much they would need to save each month to achieve these targets of expenditure. This would boost their confidence in themselves, as they would feel capable and responsible for their savings as well as the end target they want.
Urge to splurge
All humans have an urge to splurge. For women it is known as retail therapy! However, you must practice restraint and show your child that money when saved and not spent is money accrued through means of investing. It is ok to buy the occasional toy, but not spend money every week buying more toys. The best way a child learns is by watching and observing the parent. Whatever the parent does, the child follows the same. So go ahead and save, save, save...'coz your child will learn to do the same too!
Basics of investing
You may be aware of the basics tenets of investing, but how would you explain it to your child? Complicated terminology will surely go over them, so it's best once they have opened a bank account to start them off on maybe a fixed deposit, or even a mutual fund. However there is a simpler way. You could inculcate the habit of saving and investing in your child by encouraging him/her to 'invest' with you. Here you act as the bank/fund by keeping your child's money and returning an increased amount within a stipulated time period. This game would help your child understand the benefit of investments and get them started on the right path towards investing for themselves. Teaching kids to invest would prove beneficial as it will instill in them the concept of investing, and as the term duration grows they will see how the returns on their investments grow, and this will attract them towards savings and investments as opposed to spending.
Now that you have explained not only the value of money, and the concepts of savings and investing to your kids, you should remain dedicated and focused to the cause, as kids tend to lose interest fast. Maybe you can set aside time once a week, where your child and you can collate the money saved, see how much you've spent, outline how much closer is your child towards achieving that cycle he's saving to buy, and once you've started him off on a fund you can track the growth together. Introduce a new way of spending quality time with your child, by teaching them the value of money, and showing them how it grows when saved and invested wisely!