How to teach children the value of money
Shania had friends over for lunch – and handed over her note-pad to her 8 year old so that she could have some hassle-free time to be the good host. Once her friends had left, she happily took the note-pad back only to discover her son had ratcheted up a huge bill downloading game-apps. She was shocked at how easy it was for him to spend a huge amount- just to play games.
Our children are growing up in a relatively affluent back-ground but none of us would want them to take their privileges for granted. It makes sense to make them see both sides of the coin not just to build empathy but also to help them face all kinds of circumstances later in life.
One of the best ways to bring this about is to encourage positive habits and attitudes in handling money. Research shows any habits built at this age can persist and last a life-time. The key to avoiding bad money-habits in kids is to first make them comfortable with the notion of money. Start by giving them simple talks and end by eventually involving them in financial goals for the family.
One of the first rules of the game is to not give in to peer-pressure demands. It is very tempting to match the Jonases. If everyone around you is gifting their children an I-touch, then it is very easy to give in to your child’s demands for the same. You have to walk a thin line here – is the gift really an educational or useful product for your child – or is just a “match my friends” demand? If the latter, you can perhaps acquiesce once in a while but certainly not always.
Make sure you explain to your children logically and patiently why you are turning them down – this will help to reduce any resentment or defiance. A good idea for persistent demands is to make them “earn the prize”- top your exams and get the funky ear-phones, but even that should be the exception rather then the rule. This will get easier with time- once your children see you not caving in to irrational demands; they will learn to filter out exorbitant requests on their own.
Another good strategy is to talk to children about wants and needs – have them make a wish-list and then a list of essential items they can’t survive without. A lot of times the advertising industry combined with peer-pressure create “artificial needs”.
Talking about money from an early age helps children understand the intrinsic value of things. Jane came back home one day to find her 1st-grader happily playing with some new “silly bandz” the latest fad to go viral with children. So far so good- but on enquiring how she got it, Jane was taken aback to find out her daughter had exchanged a brand new watch gifted recently by her uncle for the “silly bandz”. Her daughter clearly had no idea how much the watch was worth and the reciprocal value of the toy she exchanged it for.
It is a good idea to give children a sense of how much their gifts cost – take them along to the toy-store and discuss the prices with them. Ask them to help you choose gifts for others, within a fixed budget. You can involve them in other small activities as well -whether you are planning their birthday parties, amusement-park trips or shopping for festivals, make sure to discuss and decide on budgets before the real activity.
A great idea is to encourage keeping a piggy-bank to teach the value of savings. Another idea is to give an allowance but to ask them to divide it in two jars –money for spending and money for saving.
Rabbit Savings Bank from petit bazaar
Mushroom Savings Bank from petit bazaar
Ultimately, the best way to go about it is to be a good financial role model yourself. Pay your credit-cards on time, save for emergencies and stick to budgets. This is not to say that you should leave a life of austerity, but remember by and large your own money-habits will rub off to your children. If you want them to grow into financially responsible adults you have to be ready to walk the talk yourself.
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About the Author: Anuja Agarwal is an ex-banker who quit to spend time with her kids. She now runs Pinnacle Learning Centre www.pinnaclelearningcentre.com which is dedicated to financial-literacy for both kids and adults.
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