Children nowadays are precocious learners. Their cognitive abilities develop at a very early age, or sometimes, it won’t be an exaggeration to say that they are born with it. Most of the times, their learning develops through their interaction with the surrounding. Good or bad, they take steady mental notes and internalize them over a period of time. It’s therefore advisable that parents take advantage of this and help their children pick up the basics personal finance. This way, the child will learn to value things, avoid being a spendthrift and be savvy in finances.
Introduce the four wish buckets:
It depends on the parents on how playfully they can introduce their children to the four wish buckets; charity, savings, investing and spending. Through charity, the child will learn empathy. Through savings, the child will learn about personal financial security. Through investing, the child will be discernible in ways and means of multiplying and sustaining finances. Through careful spending, the child will learn how to fulfil the essential requirements of livelihood.
A monthly allowance for personal expenses:
Children should be given a certain amount of monthly allowance to help them refrain from the habit of borrowing from others. At the same time, the amount should be a modest one that should not allow extra indulgence in anything. Now that the child knows about the four wish buckets, he or she should be guided on how to allocate the allowance fund and how to make do with expenses within predetermined limits.
Opening of a savings/post office account:
Parents should not hesitate to take their children to banks/post-offices. Children should know terms like pay-in slips, pass-books, etc. By the age of eleven or twelve, children should have their own bank accounts where they can deposit their monthly savings. Over a period of time, if they ask for a toy or a certain game, they can dig into their own savings. This would help the children understand their expectations and how much of what they expect are feasible.
Start investment early on
It is a good idea to get children start early on planning their investments. To help them further their investment planning, parents can always teach them the science of compounding interest. The sooner one starts, the better it is, no matter how insignificant the amount is. For parents who are unsure of this, may always refer to the career of Warren Buffet- world’s third richest man who started investing in stocks at an early age of eleven.
Children today are born smart. Let us nurture their smartness and leverage it to the betterment of their future. And if parents need help, which is very likely, they should not hesitate to consult with some experienced personal financial advisor. You never know how simple habits like these can go a long way to defining your child’s financial identity tomorrow.