“Is money important?” My 4-year-old cousin asked when my mother gave me some amount and asked me to safely deposit in the bank. I answered with a hearty “Yes.” I explained it to her simply telling her that her candies and toys are bought with money. At this she innocently said, my daddy has lots of money. He goes to ATM and it gives him lot of money.
It was as if she just sees money easily withdrawn but doesn’t know where it comes from and how it becomes less on spending. Today when children get things so easily, they don’t really value money. It’s important to make them understand the concepts of saving and investing so they grew with smart financial habits.
One of the great way to teach them to save and spend is introducing pocket money. Here are some money lessons they will learn when they start saving with pocket money.
1. Discipline of saving money starts at young age
Children as young as two can be taught to put coins in the piggy bank just by telling them to feed the hungry pig by pushing coins through the slot. This will simply excite the child’s imagination.
2. Money doesn’t come from bank
Explain that you work to earn money, the bank is a place where you keep the money safe and ATM gives money that you saved.
3. No shortcut. Work for it
Whether you fix a pocket money or decide to link it to chores; let it be a nominal amount. Also see that you don’t pay them for their daily chores. You reward them when they do something exceptionally good. Say, for keeping the room tidy consistently over a period of week, for setting the table for dinner, making their bed etc.
4. Saving is cool
Sit with your child and discuss what he/she wants to buy with the money that’s being saved. May be saving for a new toy, a gift for a dear one, special outing, an extra pair of shoe the child likes. Saving up for it motivates the child to save more money and wait until they have sufficient money.
5. Happiness doubles with sharing
Have your child set a portion aside for charity, nevertheless how little it is. It teaches a very important value of money i.e. it can be used to help people.
6. Every penny counts
As your child’s math skills advances, once the piggy bank is full he/she can physically count the money in their piggy bank and know how much money they’ve saved. This brings a sense of achievement and also helps them appreciate that each penny counts
7. Live within your means
Allow your child to buy things independently so he/she becomes aware of relative price of things and determines what he/she can buy. This will give them a practical experience to manage finances; planning budgets before spending.
8. Don’t hasten in spending all at once
Initially your child may just fritter his/her money away but when he/she learns that he/she has to wait until the next month or week to get their pocket money; they are sure to realize the power of saving.