Apr 2023
2 mins read

How to inculcate financial discipline in children

In today’s competitive and consumerist society where parents have little control over their children’s spending habits, it is difficult to teach them the value of money and its accountability. Childhood experiences and mental processes have a huge impact on how we handle our finances. As a result, it makes sense to instill good financial habits in children from a young age. Here are a few ideas to inculcate the right money habit among children. 

Encourage children to keep a budget and save effectively

A better strategy to inspire them is to help them identify a savings goal and how long it will take to attain it. If they know what they want to save for, help them break their objectives down into doable things. As a parent, you may offer a piggy bank or jar where kids can save their money after determining their saving goal. If they want to buy a gaming console, for example, assist them in determining how long it will take to attain that goal and how much they would need to spend depending on their savings rate.

Ensure responsibility and accountability among children by opening their bank account, interning for a short period, giving them pocket money, etc.

Align your real-world education with academic concepts such as compounding, inflation, and purchasing power. This will assist children in introducing the idea of investing and fundamental investment products such as fixed deposits, and ultimately mutual funds, real estate, bullion, and so on.

Encourage your child to build a budget and add a savings component when they begin to earn pocket money. Allow them to begin a Systematic Investment Plan (SIP) (with as little as Rs. 500 per month) in a mutual fund and strive towards a long-term objective. The amount invested can be gradually raised over time. In a few years, your child may realize the power of compounding and the importance of being a disciplined investor.

point 1

Do not micro-manage or interfere with their savings

Parents are concerned, involved, and determined to see their child flourish. However, there are situations when your engagement may cause more harm than benefit. It takes away the child's experience and impedes their learning on how to handle themselves in a practical world. Part of the job of the parent is not to do everything for the child, but to help them do things independently and address them their concerns later. Also, parents nowadays overindulge their children by giving in to all their demands as well as. It is critical to teach your child the distinction between demand and desire when it comes to money. If a youngster insists on a 'desire,' have the child pay for it with their pocket money. 

point 2

Introduce children to banking and finances

Opening a bank account as well as introducing them to banking and finances for children may be a smart idea. This will assist children in comprehending the worth of presents received from family. Children should also be taught to check their bank account on a regular basis to observe how the balance grows with interest. This will instill the habit of saving and spending wisely from a young age. At a suitable age, introduce your child to financial institutions such as banks and their functions such as accepting deposits, enabling withdrawals, accepting negotiable instruments, providing passbooks, and so on. To set a good example, parents should create a joint savings account with their underage children.

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