Want your kids to be money savvy like a world famous business tycoon - Warren Buffet or like a world famous investment banker - Bill Hambrecht? At an early, kids should be taught about valuing money, using them wisely and investing them sensibly. Making them money smart will always help them manage their future finances. Your kid won't learn the budgeting skills he needs to succeed in the future unless you teach him. So here are 5 ways to teach your kids about money management:
3 Jars concept
If your kid blows their allowance on a new LEGO set and doesn't have enough left for a DVD they really want, that's actually a good realization technique for them. They learn directly the consequence of overspending. The best way to teach kids to start managing money is to give them 3 jars for saving, spending and charity. The allowance you give them should be divided into these 3 jars. This will give them firsthand knowledge of spending accurately and the importance of charity donation.
Gift your kids a game that will help them to understand the value of coins, how to count money, work out change, manage money, earn intelligently and make learning fun. These board games can be Monopoly, Game of Life, Buy it Right, Pay Day, Thrive Time for Teens, etc.
One of the best ways to teach banking to a minor above the age of 10 years is opening ICICI Smart Star Savings Account and allowing them to operate the account all by themselves. This will inculcate a habit of savings and a responsibility to spend wisely. Privileges that come with this account are limited cash withdrawal, internet banking, personalised chequebook, etc.
When kids see bills scroll out of the ATM, they don't realize that money is a finite resource. Explain to them that you work really hard to make money, and a bank is just a place that keeps your money safe. Make a file where your kid can store receipts and statements. It's hard for kids to set priorities, so sit down together and make a wish list of the things your child wants to do with her money.
If the idea of schooling your child in personal finance seems like an avoidable topic by your kid, give them books that might interest them and also give them an in-depth knowledge. Some books like Rich Dad Poor Dad, A guide to budgeting, The Money Book for the Young, Fabulous & Broke, etc. teaches you about living on a small budget yet having a good life.
"The key to financial freedom and great wealth is a person's ability or skill to convert earned income into passive income and/or portfolio income." - Robert Kiyosaki.