According to behavioral-pediatrics, children have great mental faculty by which they can easily imitate, absorb and observe things happening in their vicinity. And all that they absorb from their surrounding go on to shaping their lives and behavior in general. Seeing you struggling with money matters, your child will lose that confidence required to lead a disciplined and a successful financial life.
While teens can easily gauge their parents stressing over financial issues, the younger ones sense monetary hardship when they notice a cut in their pocket money or other treats. But why leave it to their assumption which can be wrong or not properly understood. This false analysis made by your child can lead to stress and tension, impacting his or her well-being. You wouldn’t even know how your brilliant child may start underperforming in his/her academics and develop a withdrawal symptom.
So, here we have 5 tips to talk money with your kids-
If you have a financial problem, share it—Yes, please be as candid as possible but in a measured way. There is no point hiding your money concerns because it is not only you who is going to suffer it. The child has all the rights to be prepared for it so that he/she does not come up with expectations that are bound to crash. So, be brief, be kind and reveal what you are going through. This can also be a great opportunity to test your child’s survival skills when faced with difficulty.
Consider your child’s age — It is obvious that you cannot talk to your 6 year old the way you can talk to your 10 or 12 year old. You should be able to smartly customize an age-appropriate conversation. While younger kids may require a more protective approach, teenagers may easily figure out your financial situation without you going too deep into it. While with a 10 year old or younger, you can share your problem by way of storytelling, with someone above the age of 11, you can be direct, only ensuring your words are simple and kind. It would also be reassuring if you can share with your child how you plan to overcome the given challenge.
Early lessons in money — Today, it is very necessary that parents and guardians take this step to educate their children on how to value and manage money. Here, education is not necessarily lecturing your children but leading by example. At no time can you lose your composure or just appear too casual about the crisis. Your children learn a lot from your relationship with money. In fact, involve your child in preparing a dummy budget for the home and see how he or she develops financial concepts such as financial planning, budgeting, savings etc. Encourage your child to tag along when you visit the ATM or the bank.
Help your child build fund for higher education — In India, we are pretty much protective of letting our children work while they are still pursuing their education. Help your child open a bank account and by the time he or she is a teenager, talk about investment and prudent ways of multiplying their savings to build fund for future education. This does not mean you won’t be there to help your child but every time you pay for his or her education, you should know that you have to think about your retirement planning as well.
Forget not to talk about emergency fund — It is an Emergency fund that helps us “save our savings” during critical times. An emergency fund can help balance a financial loss resulting from an accidental damage of a bike, a laptop or sudden illness as such. An emergency fund should be a sum equal to three to six months of necessary expenses. This can also be a great relief in case of a job loss. And now that you have introduced your child to the concept of investment, it is imperative that you also educate your child on associated risks and how an emergency fund can secure him or her in the event of any uncertainty.
Conclusion — We learn math, we learn economics as essential subjects but seldom we care about lessons in personal finances for our children. It is on us to ensure that our children do not face the kind of challenges in money management that we are facing today. And this can be made possible through sharing stories from our financial hardships and also how we plan to overcome them. Great lessons in money made simple through great communication.