Instill Financial Discipline in Your Children
Many parents view child-rearing as an opportunity to make amends for the mistakes they made or ills suffered in their childhood. For some, they’ll get the coolest gadgets for the kids because they couldn’t have them or take them to the best schools for a better education.
Other parents want their kids to grow up into disciplined adults, especially regarding personal finance. But, unfortunately, financial discipline is a rarity among many young adults in India and worldwide.
The question, then, is why would your children fail to handle money if you wished for the opposite? Interestingly, experts argue that parents are often the root of the problem.
According to a survey conducted in Britain, about 20% of British parents lack a life insurance policy, and a further 70% have done nothing about inheritance and tax planning.
The situation is worse in India. So, while parents want their offspring safe and secure, they are doing less to lay a foundation on which they can build a successful life. That is why you need to instill financial discipline in your kid starting today.
To that end, the following tips are invaluable to instill financial discipline in your children:
Introduce piggy-banking at an early stage to instill financial discipline in your children
Studies show children start observation and recording information when two years old. It is also the period when they start learning language and critical activities like using a toilet.
This period could also be ideal for introducing the concept of money and saving to the young ones.
There are many tricks you could employ to achieve the goal, but piggy-banking stands out. For such a young child, placing a coin in the piggy bank is more of a game than a lesson in saving. As they grow older, they’ll start setting short-term personal goals, such as buying a toy.
After they get started with numbers, encourage the kids to identify the numbers on the coins before dropping them into the piggy bank. Also, occasionally hand them some rupees and make them purchase an item they desire, this is a good way to instill financial discipline in your children
Helping them distinguish needs from wants will help instill financial discipline in your children
The conflict between needs and wants is a plague one cannot easily shake off. By the time you become a parent, you’ve probably been on various occasions where the conflict compromised your financial position.
Now that you know better, it would be worthwhile to teach the difference to your children as early as possible.
For example, if you get some coins from the piggy bank and ask the children to purchase an item they desire, make them write down the purchase. Let them do this after each purchase and provide a tally at, say, the end of the month.
The experience should open their eyes to their spending and whether their purchases are necessary. But, most importantly, the exercise should help them monitor their spending patterns and work towards a savings goal. This habit will help instill financial discipline in your children.
Teach them how to earn an income to instill financial discipline in your children
A piggy bank instills a savings culture while distinguishing wants from needs helps children monitor their expenditure and work towards savings goals. But something else is missing from this equation.
Parents across many cultures introduce their children to the work-to-earn system at a tender age. For example, some Indian parents pay their children an allowance for specific chores, such as helping in the family business.
More often than not, the allowances aim to motivate disinterested children to take the family business seriously. Others do it to teach them the concept of income.
It helps to start this system early and combine it with savings lessons (using the piggy bank) and monitoring spending trends to instill financial discipline in your children.
Introduce kids to investment and banking to instill financial discipline in your children
You can open a bank account for children as young as 12 years in India. Also, this is an exciting time to familiarize your child with financial institutions and their products.
It is also an ideal time to shift the lessons of saving from piggy-banks to a real savings account. For example, you could open joint savings account such that you have the opportunity to teach the kid the rigors of the financial system and required discipline.
For example, walk them to the bank and have an attendant explain how their deposit can earn interest over time. The idea here is to get them excited about long-term savings and instill financial discipline in your children.
Be a role model
Children learn from their environment. Earlier, we discussed that children begin registering information at around two years old, which does not stop.
The same is true about personal finance. Kids will learn most of the financial planning from you, meaning you must clean up your act.
Moreover, you could take the lessons a notch higher by involving the kids in your financial planning at the right age. For instance, you may ask them to prepare a monthly report providing information about the family’s assets and investments.
Final thoughts
Parenting is most fulfilling when children turn out as desired. However, one is often torn between fulfilling all of the kids’ desires and instilling discipline.
If in such a position regarding financial planning, you’d better choose the discipline aspect. As with any other crucial life skill, financial skills help people navigate through life with less stress.
Please remember that there are plenty of resources online to help you achieve the goal. For instance, you could play fun games involving piggy-banks or the butterfly effect.
