The over-concerned species that we parents are, New Year is a great time to ensure that we leave our children with something to learn by, says Murad Nathani
It's the time of new beginnings and new resolutions. While some resolutions fade out in the course of the year, some are successfully carried out; those which stay close to our hearts and which truly make a difference to our lives! So how about starting off the New Year with conversations that can make a difference to your child's life, in the long run?
I am talking about talking to them on the topic of money in a way that they understand the importance of good money habits early on in their lives. Here is a low-down on the conversations you must have with your child on the big 'M':
The younger your children are, the bigger their demands are. What they lack is a basic understanding of money and which is precisely what they need to learn. No, we don't want them to become too concerned about money either but let's say, a hands-on experiential learning would help a great deal.
For starters, a learning tip in this direction would be allowing your child to pay at the toy store or grocery, so that they can see the physical transaction take place, thereby helping them learn the value of a certain amount and what you got them for that amount.
In addition to this, it is essential that they learn, all money spent is money earned in exchange for work and therefore needs to be spent a little more carefully.
Once your child understands the basics of barter and what a certain amount of money can buy them, you can take the conversation a notch higher. A pre-teen or a teenager influenced by peer pressure may come to you not with demands on what they are doing, but rather what their friends are doing. A strong realisation between wants and needs is therefore required at this stage.
As a parent, you don't want to turn your child down with a straight no, but give them the explanation behind your 'no'.
Moreover, many parents are from the school of thought that they should give their child what they didn't get when they were younger. This may however not be the right approach if it is not well-balanced with an understanding of money.
In the conflict of being a parent versus a friend, it is essential that one strikes the right balance. You could work towards an understanding where you make sure what they ask for is relevant at that age or if they can make better use of it when they are a little older. You can also ask them to set a certain goal or target to achieve, either a financial or non-financial goal to help them understand how to achieve something by working towards it.
Smart Money Management
As your child begins to grasp a better understanding of money, the next step is to learn the next level of money management. To learn how to better manage their money as young adults, and learn the art of budgeting and how to spend within a certain limit.
Investments and credit should also become a greater part of their vocabulary here. It's not anymore only about how much they save and spend, but also about building their own financially independent future.
Remember, the topic of money is not part of their school or college curriculum and hence it is difficult for our children to identify what is the next step for them. For teens especially, it shouldn't be that they step into college and don't know what goes where in managing their finances!
Planning at the start of the month along with different needs and requirements corresponding to the amount of money is just one step in this direction, but what about paying back on time, the dynamics of credit?
Or do they know the role of credit institutions and how it could impact their ability in future to get a loan? Decisions made based on a lack of sound financial knowledge can potentially affect the success of a child's future.
Hence, it is essential that your child is actively involved in the understanding of money management from spending and saving to managing and investing.
Photograph: swister_p/Creative Commons
Murad Nathani is Co-Founder & CEO -- Slonkit, first of its kind money management tool that aims to become a guide for today's digital savvy children, in terms of understanding and managing money