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23 October 2021
Every parent dreams that their children will outshine them in every way, especially financially. In today’s day and age, achieving financial freedom is much more complicated than saving whatever you can and investing in gold, fixed deposits and, maybe, real estate. It is important that they understand about setting financial goals and the various different asset classes they can invest in to achieve them.
While it's never too late to learn, the earlier you start, the more long-term benefits they’ll accrue. Stock markets and mutual funds can double your money every 5-6 years, so starting early definitely creates more wealth.
Below, we're sharing some tips and tricks to learn about money for kids of all ages.
Children begin learning as soon as they are born. This learning begins with imitation, including following a parent's lead in smiling, tracking objects, and saying their first words. They are learning and picking up on your habits whether you are aware of it or not.
Begin by establishing a positive example for them to emulate. They'll pick up behaviours like creating a grocery budget, working hard, paying bills, and not buying items that are too expensive. When you talk to your child about how you make decisions, they'll eventually start replicating your decision-making with respect to what to buy (or not).
While children of this age may not grasp the value of money, they should be aware of the necessity of paying for goods. Shared experiences help children learn, so engage them in the grocery shopping trip to help them comprehend the process. Leave the credit cards at home and pay with cash to make it more tangible. This is a good age to also introduce the concept of jobs and careers, and how money is earnt.
Your child is likely to desire more now that he or she has a basic concept of money's purchasing power. It's time to go through how to make money, save money, and calculate opportunity costs. Some concepts and activities than should be covered are
Unfortunately, money does not grow on trees as our parents warned you. It must be earned, and it should be gained with chores for children of this age. Work should be rewarded with personal funds rather than an allowance. This teaches the most important financial lesson: money is earned via hard work.
Instead, of a piggy bank try using a mason jar so that the child can see money grow in a clear jar over time. It aids in reinforcing the advantages of saving. You can also introduce the concept of a bank account and possibly open your child’s account.
Even if you don't use the term, a 10-year-old should be capable of understanding the cocept of opportunity cost. When one option is chosen, the opportunity cost is the loss of potential gain from other options. You can teach your youngster the difference between impulse purchases and long-term aspirations.
The following stages concentrate on elaborating on the fundamental principles of income and budgeting.
Examine several career opportunities and talk about their tasks as well as their salary. This is also an excellent time to clarify why your pay isn't the same as your take-home pay, because of taxes.
While your child does not require a personal budget at this time, it is a good idea for him or her to understand how to create one. Include them in your budgeting process by soliciting their feedback on financial matters such as meal planning and grocery budgeting.
Teenager’s desire and require increased levels of freedom. It doesn't take long for them to be on their own. Many of the teachings at this stage are influenced by individual experience with a bank account and college budgeting.
While your child may not use the same check register you did, every youngster should be able to balance a bank account. Personal accounts do demonstrate your financial management skills.
Our culture is increasingly reliant on credit cards, which offer their own set of advantages. They may, however, entail exorbitant fees and interest rates, which is especially true for those with little or no credit history. Teenagers must understand the risks of credit cards and how to use them responsibly.
The expense of college, as well as student debt, is growing. Compare the prices with your teen as you plan for the next step, and talk about how you'll pay for college.
Children can start investing in mutual funds or fixed deposits at an early age, and you should encourage them to look at various options and differences between them. This would also be great time to help them understand the risk-reward trade-off that exists in not only the financial markets, but also other facets of life.
It takes a lifetime to learn how to manage money. The sooner your child develops solid financial practices, the more likely they are to succeed financially and create wealth for themselves.
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