The importance of money management lessons for children

As part of formal school and college education, children learn various different subjects. But one area that’s totally missing from the education curriculum of kids is money management. We teach a kid arithmetic – sums, percentages, ratio and proportions, and so on. But would we confidently send the child to the neighbourhood kirana store to buy a couple of items and pay for it correctly? Checking the bill for prices, calculating discount percentages on items purchased – are they not the perfect test of what the child has learnt in school?

We adults play multiple roles in the lives of our children – as parents, grandparents, teachers, mentors, role models, elders, and well-wishers. Let’s take up an important aspect of learning and impart Money Management for children, a valuable advice to our children regarding a critical aspect of life – handling finances.

Ask any middle-aged person when was the first time they were handed over any money by their parents to spend on their own. The most common answer you will receive is – not until high school! When teenagers started using public transport, only then parents would give them money. And never more than five rupees or ten!

Today’s kids, even at the age of four or five are compelled to carry money with them. One common reason for this is that working moms allow the kids to pick up lunch at the school canteen. A child’s first experience with managing money might still be the good old piggy bank. But today, money is not just held and spent as notes and coins. Digital money is the latest revolution in money matters.

The sooner adults start to have money related conversations with their kids, the better. There are a few pointers for us adults to consider while introducing the subject of money management to kids.

Tip #1: Educate them on the value of money, whether digital or real. Irrespective of the financial position of the family, children must be made aware of the importance of money. The efforts that go into earning money, the problems of overspending, and the trap of debt are all important lessons that need to be imparted to children. This will motivate them to work hard towards a career goal and then enjoy the monetary rewards of their effort. Sometimes when money is in digital form, the tendency to spend is higher than with cash as the loss is not directly visible. This is especially true with kids and teenagers. Educating them towards the pitfalls of mismanaging money is critical.

Tip #2: Don’t hide the true financial situation of your household from your children. If there is a fund crunch at present and you are saving up for something essential, but your kid is hankering after an expensive toy, don’t give in. You are not doing the child any good by insulating him/her from the realities of life. Let them understand the true value of money, and then evaluate whether they really need all the things they aspire for!

Tip #3: Lead by example, kids learn more from your actions than words. How kids spend their pocket money is probably one of the first lessons they learn in managing money. They often hope to buy things that are way beyond their pocket money. But when adults at home do that  too, how can we preach to the child? If we spend recklessly, take on huge loans, default on credit card bills, then that’s exactly what the child will want to do. So our own personal financial management is the best example we can set for our children.

Tip #4: Saving vs investing – teach them the importance of both. Its not really a question of either or. A penny saved is a penny earned, so inculcate the habit of saving in children early. This is something they can do right away, whereas they have to wait for decades to actually start earning ! As for investing, start with simple FDs and government small saving schemes in your child’s name.

We also recommend trying chit funds. It’s a simple and perfectly suited alternative. When the quantum of expense is known and the time is also fixed, chit funds turn out to be the best available option. You can put in a monthly instalment for a tenure of 25 months, and withdraw the entire accrued amount exactly at the time you need it. No need of taking loans and paying interest, this money is entirely your own!

Tip #5: Restricted access to smartphones. Kids might use a parent’s phone to call their friends, watch videos, play games and so on. As long as adults use the phone in front of the children, it’s impossible to prohibit the children from accessing the phones too. But there must be clearly defined limits for this. Which apps are permitted? When can they use? And for how long? Such things must be clearly laid out and the children must be trained to abide by these restrictions. Financial fraud perpetrated through smart phone lapses is a huge problem confronting us today. We must keep our children informed of the dangers of online fraud.

We at Shanthala Chits consider ourselves as financial partners of our valued readers and customers. The financial stability and prosperity of our investors is our primary goal. Educating our children on money management and financial matters is of prime importance in order to meet this goal in the long term. So we thought of passing on this message to our readers and investors.

About Us:

Shanthala Chits is a Government approved chit fund company with a 25-year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, the Government of Karnataka. We are one of the most popular chit fund houses in Bengaluru, known for our prompt customer support and secure investments. Get in touch with us and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs.