Raising Financially Independent Kids:
It is never “too early” to introduce the concept of Money Management to kids’. Even if you haven’t discussed directly with them, they hear how we talk about our finances at home, how our buying behaviors are determined. Raising Financially Independent children is the need today. Millennial kids need to understand the importance of savings, managing their expenses, and even investing money.
The way our kids will manage money in the future depends a lot on the kind of exposure and learning they get today. Hence the earlier you start, the better it is for them.
How do I make my child Financially Independent?
1. Save, Spend, Give model:
Start with creating individual Money Jars. Create labeled jars, each for Saving, Spending and Donating. With these jars, your child can decide to divide the money earned and see how it works. Money-saving is always goal-oriented, so let them set their goals. For younger kids, it can be spending on a special toy they want. Help them with their spend analysis, which will help them learn the small transactions.
Also, ensure that the money being saved is earned against the chores decided. When we opted for this approach, my Lil boy wanted to mop the whole house all by himself;). He negotiated hard to increase his earning for a bigger task and well that’s how I saw that the concept of “negotiation” came into play. Also, a sense of responsibility was set in. As the days passed, he understood the basic fact of Life that Money is earned the hard way!
2. Be a good Influencer:
Well, by this I mean, that you as a parent should lead by example since kids are influenced by their parents the most. Promote small savings, by using discount vouchers, shopping the essentials, utilizing the sale time. Instead of buying a Birthday card, sit with kids to make a creative card. This not just ignites their creativity and gives a personal touch, but they will also save some money.
Help them understand, how money saved today can be utilized to spend on some big purchases later. A comparison of candy and maybe a remote control helicopter will be enough for them to understand this math.
3. Show them how Saving can multiply the money:
Let them experience how One rupee in their piggy bank multiplies into Rupees 10, and how that can further multiply to Rupees 100. While they would buy a single candy daily spending that One Rupee, they can buy maybe an Icecream tub if they let the money accumulate. Promote them to save before spending. This will also help kids make aware choices and expenses they want to make.
The concept of the Emergency Fund should also be discussed. They can keep 10% of their savings towards uncertainties that life brings along. This is very practical learning and will certainly help them as they grow and become independent.
4. Invest their Savings:
These days, there are many opportunities for Child accounts. Once they have accumulated a decent amount in their piggy bank, make a transition to Savings schemes. Open their savings account and try to help kids understand how the banking system works and how can they benefit from it. They can keep on accumulating money in their piggy bank for tiny expenses they want, but how this bigger chunk can grow much bigger, is what they can understand with their bank account. Helping them understand about Savings is a very big aspect in raising Financially Independent Kids.
5. Encourage them to Give:
Having a kind compassionate heart is a value we need to instill in kids. They can save some money in their Donate Jar and buy candies, small toys for poor kids they see around. Well, giving is not just about money, it can also be spending some time with differently-abled kids, or maybe some societal voluntary activity. This way kids will also understand their role towards the society they live in and contribute to the cause they care about.
Don’t wait further, you can start Money Management with kids even when they are toddlers. I started this with my son when he was 4years and have seen massive changes in the way he perceives things now and his Independence!
Why not share some more of your ideas on raising Financially Independent Kids?