Teaching and motivating children to save money enables them to use their cash wisely in their adult life.
Spending and saving decisions made in their childhood can have an impact on their financial future and also influence investment decisions they may ever make.
As soon as children can count, they should be introduced to money with the objective of laying a solid foundation for financial responsibility, which helps them to make good spending decisions in future.
Personal finance experts reckon that people who don't learn about handling money at a young age often mismanage their finances in their adulthood.
Hence, parents are advised to teach children the basics of saving and spending in their early years.
-To give youngsters a free hand in managing their finances, they should be allowed to make withdraws from their savings kitty and make their own spending decisions - whether good or bad - to enable them learn how to make independent decisions.
-A regular family talk would help younger children to openly talk about money. It is at such forums that they can gather information on how to build savings and how to spend. During such meetings, they can be able to understand the basics of financial decision making and they should be taught that they can't get everything they want.
-At a tender age, youngsters should learn the perils of borrowing and paying interest. A parent or guardian should charge interest on small loans made to them, this helps them understand how expensive it is to use someone else's money. This value can be grained in them through goal-setting sessions for what they need, for instance toys. These sessions help them to prioritize how to spend.
-Many youngsters think automated teller machines (ATM's) are magic machines that discharge cash at the touch of a button. However, children should be made to understand that to get cash out of an ATM, deposits should be made - and that this is only possible by earning through working. Parents should make the impression that work enables a person to pay bills, rent, food, clothing and entertainment.
-While using a credit card, parents should take the opportunity to teach children about how the card works. They should be shown how to verify charges, how to calculate interest, and how to guard against credit fraud. They should be told of the high interest levied for cash advance using the card and other punitive penalties that come with plastic money.
-Children should also be encouraged to keep records of money saved or invested. This is an important exercise that will introduce them to the art of book-keeping.-Parents should demonstrate the concept of earning interest income on savings. This can be done by topping up on what they save as it helps children see how fast money accumulates through the power of compound interest. This simple exercise helps them understand how savings accounts earn interest.
-Opening bank accounts enables children to learn how banks operate.
