Parenting Financially Responsible Kids
Knowingly or unknowingly, teenage children tend to clone the actions and habits of their parents, especially money management - be it shopping, cutting down on expenses to save or even spending irresponsibly. Rightfully then, teaching children money management is not just about setting a good example by being financially responsible but also consciously helping them achieve early financial freedom. Here’s what parents and guardians can do on this front.
Talk, talk and talk about money: Conversations around money should be fluid and natural in nature- at home or otherwise. Parents have higher financial experience and should narrate both, their mistakes as life lessons and success mantras as motivators. Real life situations provide opportunities to learn about small yet necessary financial nuances. For example, parents could explain how they track their expenses via their monthly budget; relook at the shopping list, compare prices of similar products and stick to the pre-decided budget. Teens is an ideal age to start discussions around how loans work, especially when used in right instances with a focus on explaining the risks of using credit irresponsibly.
Reiterate the importance of earning money: In India not many families encourage their teenage children to earn their own money, even if it is a shorter side hustle; leading to some children getting carried away and developing a sense of entitlement which hinders their overall development. Parents should inform their children that the house runs on more than one source of income, which may be passive (in many cases) for additional security. As a first step, they could be assigned household chores- making their own beds, cleaning their room, taking stock of a week’s grocery supplies etc. in exchange for allowances. Older kids should also be motivated to take up internships which could help them in understanding the importance of hard work.
Allow teenagers to experience managing their own money: They must be taught the number one role of paying themselves first and handling their allowances for their own bills while they’re under their parent’s roof; be it the first monthly bill of their smartphone. Encourage them to save 15-30 per cent of their monthly pocket money for such expenses along with casual or occasion-led gifting to their friends or when they hang out with their peers. Helping them get a grasp over such basic personal finance aspects will help them in their journey of getting financially independent.
Educate teenagers about credit in an age appropriate fashion: Parents must help teenagers understand the concept of credit early on, so that they are better equipped to make sound financial decisions in future. Parents could act as a make believe bank from where their children could borrow money; along with a payment due date post which a certain percentage would get deducted from their pocket money. This is a simple yet impactful way that educates them on the consequences of not paying dues on time and sets a precedent for teenagers to engage with financial institutions in times ahead.
Remember to well define the bigger picture of attaining financial freedom: Children must be made to understand the risks associated with abusing credit or overspending. Additionally they should be made to realise that financial responsibility works hand in hand with achieving personal goals- buying a new gadget, planning a vacation with friends or any other wants. Parents should reiterate that money should be looked at as a useful tool versus something to be veraciously cautious about - to help youngsters have a more positive relationship with it.
Children will at some point of time make mistakes but that indeed is one of the best ways for them to learn. The stakes will get bigger as they grow older so it’s best to start today!
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