31-May-2017 written by : FSI-Team
No one teaches the importance of CIBIL score check, or how to use loan EMI calculator at schools. However, these things become important in everyone's adult life, and whether you are good or bad at managing credit depends on how you spent your money in your childhood.
One of the most valuable lessons that you can teach your child in their life is money management. Granted, they may not need to manage money a lot in their young years, but if they are prepared in advance then they can lead a comfortable life by building a strong credit in the future.
The following are a few ways you can teach your child how to manage money at home:
Gifting your child a piggy bank is a sweet little way of teaching them the importance of saving money. However, equally important is the message you give along with it. So, as you hand over a piggy bank to them, tell them why they must put a portion of their allowance (10% is a good start) in it. Tell them how they can save some allowance every week and then after a few months use the collected money for buying something expensive they want.
If your child has entered adolescence then you can also open a bank account for them. Many banks and other institutes offer student bank accounts, etc. which you can check out.
When a child starts understanding how a bank works and what are the advantages of saving money in a bank account, it can prepare them for the adult financial life well.
Saving money is important, but of course, saving money along with goals is even more important. Thus, one of the best ways to teach the lesson of financial discipline to your child is creating a savings chart that consists of goals and associated timelines.
Ask your child what does he wants to buy that costs a lot of money and based on its amount create a chart. It should be used for tracking how much money is being saved in the piggy bank/bank account. The idea is to reach the target amount by a certain date, according to which your child should save money on a regular basis.
This lesson will come in handy when your child grows up and has to pay EMIs and credit card bills. With the lesson of money management instilled in them, they won't ever have to spend hours with loan EMI calculators or worry when conducting a CIBIL score check.
Children often take money for granted, mainly because they don't have to work to earn it. They may also spend their allowance recklessly and without thought. So, to make sure your children realize how valuable money is and they should use it only for important things, ask them to give accounts of their spending. This way you will know where their money is going, and you can also direct them in the right way if needed.
For children, their parents are often their role-models. Thus, the way they handle things in life or behave in certain situations is based on how their parents handle situations or act in certain situations.
If you want your child to be a good money manager or a responsible credit user in their adulthood, then it's important you reflect the same qualities in your own personality. Don't spend credit excessively, pay your bills on time, and make sure you don't let debt accumulate. These small things will have a huge impact on your children, for their brains are like sponges- they just soak in information from their environment, whether it's good or bad for them.
By teaching your children valuable life lessons of money management you can prepare them for their future. This way, they won't have to struggle for money ever but they will also become more responsible and mature overall as well.