The joys of living within a budget come into play only once we start earning. But learning all about making a budget, managing it and understanding how basic Math is used in real life, doesn’t have to be left to adulthood. Starting early is highly advisable.
Here are some handy tips, tricks, and concepts that would help kids understand how to manage money.
1. Money doesn’t grow on trees
Kids often see their parents and other adults getting cash from ATMs, or wallets and that creates an impression that money is easily available. Where does it all come from? Well if that’s the question bothering the little mind, it is time you answer it and make them realize the source of money.
Money lesson: Using role-play to explain what happens in a bank is a great idea. While someone can be a cashier, the other can be a customer service expert. This, followed by a visit to a bank branch, is an ideal way to get the concepts ingrained and answer the simple question: where does money come from?
2. Money is not alien
It is important to let kids handle money. They need to be familiar with the denominations and the feel. They should not be foreign to money matters.
Money lesson: Use the art class to make fake money notes. No, we are not teaching money counterfeiting (the law will teach that lesson!), but drawing money notes can help understand the different denominations, their colours, and even the history of the country.
3. Planning and budgeting is crucial
Your child needs to learn that money, savings, and its growth are all about proper planning and budgeting. A child needs to know more about expenses and cash flow, and how an occasional pampering can be paid for.
Money lesson: Remember the profit and loss class in Math class? Well, it is time to make that real for children. If there is a class production planned or even a class picnic or event, let the kids create a finance team and work on expenses for the event. If there is a profit, they can plan a treat for the class.
4. Savings make or break you
Why are savings necessary? It is important for children to know how savings could help a person become secure. Savings lessons are not just restricted to money matters but could be extended to water, food, clothes and other items.
Money lesson: Since savings apply to all aspects of life, including the environment, it helps to celebrate it with a theme like ‘Savings week’ or ‘Savings month.’ From debates on whether savings make any sense at all, to depicting a world where no one saves, there is so much to do and learn here!
5. The idea of interest is interesting!
Let your child know the concept of interest and compounding (if possible). Sometimes savings are not enough to buy those expensive skates or that trip to Disneyland. It helps to learn how the power of compounding helps in achieving a financial target.
Money lesson: Money grows, money can be invested, money gains interest! These aren’t easy concepts for kids, but we would recommend showing this video to understand how it works. The concept and look are similar to an expert analysis on business television (think CNBC!). Nice!
6. Banks are safe keepers
Children are sometimes under the impression that you can get money from banks and ATMs easily. After all, whenever they visit banks along with their parents, they see money transactions happening freely. It is tough for them to understand that the money is owned/earned by their parents.
Money lesson: Apart from the role-play lesson above, encourage parents to open savings accounts for children. They should be aware of simple services like funds transfer or balance inquiry.
7. Money matters come with confidentiality clauses
Parents might have told children about their earnings, but it does not mean that they share that information with their friends too. How much allowance one gets should also be kept private too!
Money lesson: Play a game of keeping (fake) secrets in school and make this one secret that can’t be shared. Make secret keepers answer a bunch of questions prodding them to share confidential information. The ones who keep their secrets win!
8. There is no shortcut to hard work (and earning money!)
A child may meet a friend or a senior asking for money in exchange of a collectible or promising a scheme where money doubles. These deals are mostly to con kids. It is important that kids know that they must work hard, improve their skills, and perform well to earn money.
Money lesson: These lessons are best explained through stories. And there are so many of them. Alternately, getting a successful parent or alum to come and speak about their experiences can make this quite real for kids too!
9. Patience is key
The most crucial of all money matter related stuff is to be patient. There is no way one can get a seven-figure salary on his/her first job. Money grows as you grow!
Money lesson: Teaching patience is a key life skill. And there isn’t really one lesson that can teach it all. Through time-outs and delayed gratification games, children need to learn the fruits of patience.
Letting children understand money when they are in a form of cash would be a good way to start teaching money lessons. It might be easy to understate the importance of saving money if kids are only exposed to digital or cashless transactions.
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