Making your kids financially literate is a herculean task because there is never a right time to start. As soon as your kids start learning how to count and go to school, they are bound to be exposed to the various facades and complexities of money. Before that happens, make sure you start teaching your kids about finance by adopting these 5 ways.
Allocate an allowance
The point of allocating an allowance to your kids is not so that they can spend more money on school lunch, but so that they understand the relationship between spending and saving. Teach your kids to keep a money book where they can make a log of all the things they wish to buy in the next six months. Instruct them further on how much they should be saving each month in order to fulfill their wishful purchasing. In addition to this, allowances will also help kids understand financial priorities. "Should I rather go to the picnic with my friends or save up for watching that movie?" are the kind of questions your kids will start putting into perspective.
Trips to the bank
There is no right age to allow your kids to accompany you to the bank. The earlier they are initiated to banks, the better. Gradually introduce them to the various counters of service in a bank and explain to them the concept of each function – cash, cheques, savings accounts, deposit slips, application forms etc. Better still, introduce your child to your local bank teller and book a session where the teller can walk your child through the basic concept of banking. As a mock session, send your child to the bank with small errands to run and call your teller to guide him/her through the same.
The key to teach financial literacy to your kids is to start making them do things by themselves so that they can become confident.
There’s no better way to teach your kids financial literacy than to take them grocery shopping with you! Arm your kids with a calculator and share your monthly grocery budget with them. Help them take a call on which items to skip and which items to put in your cart. Teach your kids about the best money savings brands on the shelf, how supermarkets lure customers to buy more, how to look up best before expiry dates, how to check the warranty clause of a product, what are the best deals to opt for and so on.
When you are imparting financial literacy to younger kids, make sure that you use cash and avoid swiping your card so that your kids can learn how to handle cash. As they grow slightly older you can use cards at places like restaurants and malls and teach them the concept of credit.
Give your child a loan
Has your child been haggling with you to buy their favorite pair of denims? Instead of refusing point blank why not take this opportunity to teach them some lessons in finance? Agree to give them a loan for their purchase and tell them how you will charge an interest on repayment. Your kids should also be able to understand that each month, a certain amount of money will be ticked off from their allowance to fulfill the interest on their loan. This will be a great way for them to get real life lessons on EMIs, interests, types of loans, budget calculations and so on.
Encourage your kids to work part time
Whether they really need the money or not is not the question. You must encourage your kids to take up part time work. Apart from learning about the basic concepts of earning, saving, growing money and paying tax, they will also learn the etiquettes and discipline of a working relationship, taking leave, dealing with work politics, negotiating pay rises and so on. If they are still underage to work, set up a mock business of selling lemon juice to the neighborhood on a weekend and teach them the various elements involved – sourcing ingredients, setting up a stall, keeping accounts, dealing with leftovers, building a relationship with the customers and so on. This will be the best hands on experience for your kids to get financial literacy.