Value of Money- Financial Literacy

Importance of Value of Money- Financial Literacy: 

Today many parents are well educated and well read which helps them teach things like manners, politeness, etc to the child but few know how to teach the child value of money. I frequently have parents coming up to me with issues of stubbornness, tantrums, back answering, etc. Some common questions I am asked are “how to manage a child who often demands for more and more?”“Is it okay to get a child everything he asks for?”The real question to ask here is whether it is okay if the child is NOT given something WHEN he asks for it. Does he react well to a NO from parents? Does he value money? What is his financial literacy?

In this article I hope to help with answers to these questions.

Nowadays kids do not value the things they are provided with. Their demands are ever increasing. This is due to the faulty pattern of instant gratification most parents succumb to. I advice you as parents not to let children obtain money or demand goods by whining, cajoling or throwing a fit. Teaching the child value of money is a life skill that affects you as well as them. The child will learn the value of things (small or big) and learn better satisfaction, patience, understanding and responsibility. Intern increasing their financial literacy skills.

You cannot teach a child the principle of financial literacy/responsibility unless they have some money of their own to manage. Starting of allowance is a good idea in this regard. But let the child know that he can spend his pocket money only on specific items/work as decided by you. Having said that, I am advising on pre-deciding your rules & regulations mutually.

General Tips to teach the child the value of money:

1. Start early- Start as soon as they are able to count and they start asking for things/goods. Speak to them about saving versus spending.

2. Want Vs Need: Make the child wait when he demands for anything. Do not fulfill their demands immediately or as soon as he asks. Teach him the difference between a WANT (asking for something because their friend has it) and a NEED (asking for something they need to achieve some goal).

3. Difference between goals: Pay money as per the goals of the child- differing amounts as per differing goals.

4. Learn from mistakes: Let the child take responsibility for every rupee. Let him learn from each mistake which is the best way to learn.

5. Be a good role model: Children learn a lot by observing their parents’ saving and spending style. Hence, for your child to adopt value for money, you should practice the same in your life.

6. Emphasize on EQ (Emotional Quotient): Teach him to value feelings and emotions more than materialistic things. Example- Instead of spending money to buy gifts for a friend’s birthday, he can make something that will show his feelings and emotions to the birthday child.

7. Help the child make a budget: Teach the child how to deal with his daily expenses. Sit with them to list the weekly expenses.

8. Teach them to save for a rainy day: Example-Having to buy a gift for an unexpected birthday

9. No extras before the new month: Be absolutely clear to the child that he will not get any extra allowance or advance pocket money before the month is over and be very firm about it.

Sometimes the tips shall also vary depending on different age.

Teaching Value of Money to: Age 4 years to 7 years:

• Value for Feelings and Emotions: With little ones, always try to motivate them with rewards of love, affection and hugs rather than money or materialistic gains.

• Earn your demands: If the child needs something, don’t immediately buy it for him. Let him save money or earn it by doing something that is worthy of the demand. This would be a great way to teach them value of money,

• Teach delayed gratification: Teach the child to wait for his demands to be met. Let him know that right things will come at right time if needed and that parents are the best judge for that.

Teaching Value of Money for: Age 8 years to 15 years:

• Age appropriate allowances: Decide the amount of allowance according to the child’s age. This will especially help when you have two or more children of different age and the allowances have to be distributed amongst them as per the needs of the age.

• Home lifestyle appropriate allowances: Look at your own lifestyle to gauge how much money you should be allowing your child to have as his allowance. make sure you don’t just understand but also believe and follow when you make them realise the value of money.

• Enjoy the cycle of money: Let the child experience the joy of fulfilling his own demand from the money he has saved from his allowance. In the process let him also lose some money, learn from it and start saving for a new demand. The cycle hence continues teaching the child many positive things in the process.

At the end of the day, the goal is to let the child understand- A penny saved is a penny earned.

Your feedback and questions are welcome!