7 Ways of Teaching Kids about Money - Money Management

During our stints of parenting, we all face several difficulties in teaching and discussing different aspects of growth phases with our children. Conversations related to adolescence, career choice, money management, and imparting the values that we want our children to learn are undoubtedly difficult, yet these are the factors that play significant roles in shaping the lives and careers of the kids.

Teaching kids to save money should start from an early age, as you can't accomplish it in a day. However, the biggest question that arises is when would be the right time to teach kids about money? It is apparent that you can't talk about money with your kids before they are six years old as they won't understand; however, don't overthink! Start it as soon as they enter that age bracket. During this age, the grasping power of kids remain high, and they start understanding basic mathematics. But remember that financial literacy can be a boring subject for kids to learn, so you need to adopt a few smart and playful techniques to make them understand the nuances of money management.So here we are with seven easy ways of financial literacy for kids:

Make Financial Literacy Enjoyable

• Since the time your kids start learning maths, teach them practically using coins. Coinciding finance with Math would be an interesting mode of teaching and children will adopt it quickly. It’s a great first step to initiate the learning process. You can also play field games with your kids to give them practical experiences of basic maths that we do in our daily life -- you can act as a shopkeeper, and they can be the buyers.  Explain the simple calculations of addition and subtraction that are required in shopping. After a few sessions of shopping simulation at home, send your child out to face the real world either at a store in your society or at any nearby shopping mart. Ask them to make a list of items that you want, then allocate a certain amount and explicitly instruct them about sticking to the list. To motivate them further, tell them that the amount they will bring back will go into their piggy bank.
  
  
• Take your kids for shopping and tell them what entails in your budget. Talk about the budget crunch and the exclusions; explain to them the reason behind it so that they may understand the significance of setting a budget. This way, they will also understand that their parents have certain limitations on their demands.
  
  
• Start playing board games such as Monopoly, Business Owner, Payday and Career with your kids while they grow up and make them co-relate these games to real-life situations -- being business owners, how can they utilize their money for opening more companies; when does the payday come for an employee and what are the necessary components of the salary; how to make clever financial deals, etc.

Ask Your Kids to Negotiate

The retail sector is getting more and more organized, leaving very little scope for negotiation during purchase. However, if you want your kids to learn to bargain, then send them to bring vegetables or fruits from the street hawkers. Ask them to check the price per kg before buying the items and then teach them to ask for discounts from the vendor on the asking price. It will be the first step towards learning negotiation. As the kids get into the habit of shopping often, they will get a rough idea about the market price of several items, based on which, negotiating with the hawkers for a better deal will become easier for them.

Teach Simple Budgeting to Kids Through Money Apps

You can also use apps like Savings Spree to make financial literacy for kids enjoyable. It also tests the financial knowledge of kids at each level. There is another app called Save! The Game that takes kids through the fantasy world in which they can collect money and avoid impulsive buys in the urge to save more.

Discuss Family Expenditures with Kids

Let your kids know about the significant expenses that you are planning to make. For instance, if you are buying a home, tell them how you are arranging the money through a home loan, the eligibility criteria, the percentage of the amount that you have put in a downpayment and the tenure of the repayment. Here, the purpose is not to put kids under any burden and financial insecurity but to make them realize that their parents are not inherently rich; in fact, they have worked hard to accomplish these life goals. Even if the kids do not understand the technicalities of the loan process, they will surely get a sense of responsibility that is required.

Let the Kids Plan for Family

If you are planning for a vacation, let your kids also know about it in advance. Ask them to make a list of their dream destinations, and the activities they want to include in the package. Then you can keep a piggy bank at home, label it as ‘Family Trip’ and ask your kids to put a certain amount from their monthly pocket money in the piggy bank for the family vacation. Also, inform them that you’ll take care of the remaining expenses. It will give them an exposure to saving money, teach them how to chip in for adventures and entertainment, and they will also rejoice in the feeling of being able to contribute to the family outing.

Teach Savings to Kids Through Money Goals

When you give pocket money to your kids, ask them to save 2% of it initially. After a point, when they accomplish the previous goal, ask them to save 5% and give it to you. You can also associate the savings goal with their unreasonable demands as well. For instance - if your kids are nagging you for something expensive, ask them to save money for it. This step will help them in two ways:

• They will not waste their entire pocket money.
• They will develop a habit to save.
  

It is one of the smart ways to save money by kids.

Allow Your Kids to Make Mistakes

Be prepared for the mistakes that your kids will make while performing the tasks that you have assigned to them. However, don't forget to correct them by explaining. Let’s consider an instance when the kids bargain with the vegetable vendor to such an extent that the vendor refuses to reduce the prices as he/she is not getting any margin. The kids might come back to you, disappointed as they’ve failed to negotiate. In such a scenario, ask them about the problems that they faced while bargaining and explain the reason why the vendor didn't agree to the price. It will help your kids understand the nuances of financial negotiation along with some basic mathematics.