Financial Management for Children
One of the common things that is being observed is that we do not teach our children the art of saving money. During the changing economic scenario, banks and other financial institutions have competed with each others for loans and lending rates. Today, you will get loans for almost everything. Be it for education, business, dream home, dream vehicle and so forth. And the tempting offers makes people like you and me to jump at it. Why? We never found or planned enough money for the requirement.So what if we teach our children to save them from the very beginning. To start with simple steps can do a lot: -
1. Piggy Banks: - Though everyone of us know what it is, but we never encourage our children to use it. To start with, we can set some target for them. Just to say, A 8 year old child can be gifted with a piggy bank and a deal. Out of your monthly pocket money, let us see if you can afford a bicycle within 2 years. That can be a challenge to the young chap, instead of dad himself getting it for him sooner or later; he will start planning out for it. This will create a belongings feeling for the child and mentally he would visualize getting a cycle by himself,.
2. Financial Ledgers: - Sounds quite complicated? Not at all. For a child, this can be fun. A plain notebook with income and expense columns. Make sure your child fills it up every day. Even if both the columns are zero. Do take your time to explain in simple words what income and expense is all about. This can additionally be challenged to create income 2X or 5X times of expense within a time frame viz. 6 months or 12 months.
3. Unexpected Expense: - It will always be wise to teach your child about the unexpected expense. This can even lead to use up some of his savings from piggy bank. But yes, do it and it may be hard on the poor small chap. But make sure he learns the lesson and perhaps quick replacement of a new piggy bank will surely make him smile. I strongly recommend this even if there is no necessity to break the savings. But let him learn that this may happens in life.
4. Save and Spend: - This step may be for little older ones when they start earning their own. Make sure the piggy banks are replaced by bank accounts. And let him search the best bank to deal with.If he is working for some company, business groups or chains, it is expected that he will have a constant money flow every month. The case may be different when he is starting his own business.Once he gets his salary, encourage him to put a sufficient amount of money in perhaps a fixed account/recurring account at the very beginning of the month itself which will be hard to withdraw. And then start spending whatever is left with him. This will ensure that he learns the art of saving money before spending. It is often noted that first salary is mostly spend on personal expense like a new shirt, jeans, perfumes etc within the first few days.
5. Work before Own A Business: - Help your child to set realistic goals for his life. One of my friends wanted to start a business immediately after completing his schooling. But his dad, a well known entrepreneur asked him to work in a company for few years.He reluctantly agreed and worked for a very low salary which was not enough to meet his luxurious living style. But his dad encouraged him with lots of important lessons of finance and some of them are mentioned above. Slowly and steadily he started to understand what it takes to build a business and how money is all important for it. He understood that saving a penny is worth if you have a great dream….Today he is a famous manufacturer who conducts lots of seminars on “Business and Money”.
So let the learning start from a very early age. Financial management should be taught by parents before B-Schools can refine them. The school education can only polish the basics education and habits.