“Financial freedom is available to those who learn about it and work for it.”
~ Robert Kiyosaki
With knowledge comes power. So begin the moulding process from today itself, so that your child’s future is shaped perfectly for facing all the challenges of their tomorrows.
5 Financial Management Tips You Need to Pass on to Your Kids
Make it a point that your child is not just mentally and emotionally but also financially prepared to lead an independent life.
- Financial behavior: Make your child understand that different people exhibit different behaviour in financial matters. Not all will repay their loans, and not everyone will lend them money either. So, the best way out is to manage expenses within a budget and offer financial help to people, only if they are trustworthy by nature.
- A penny saved is a penny earned: Open a bank savings account or even a simple piggy bank, when they are young, and teach your children the basics of banking. You can incentivize savings by adding say Rs 50 for every Rs 500 saved, as interest earned. You can then explain about the various savings options in the form of fixed or recurring deposit and can show how it works when you bank online.
- Differentiate between wants and needs: You must inculcate the ability to differentiate between wants and needs, right from childhood. Try not to make impulse buys and explain the reason for your decision. For all the high-priced items, teach him a 7-day theory, wherein, if he needs an expensive item, he will have to explain the need and urgency and then wait for 7 days and then come up again with the reasoning. If he still feels his demand is justified and you too agree with it, only then consider buying the product. This 7 day period will help them analyze their desires versus real needs.
- Before borrowing, let them save and earn money: Teach your children to save, cut back on expenses and find ways to honestly earn money before thinking of borrowing, as an option. Borrowing must be considered only if they have the ability to repay it within a stipulated time frame.
- Credit means debt: In the current age of easy banking and credit cards, it is important to teach your children the equation that credit equals debt and therefore they need to use credit knowledgeably.
Work on building these habits from an early age and you will notice how it becomes a part of their natural behaviour to save and spend judiciously.