A-Z of personal finance: K is for kids

Parents are often faced with a dilemma; we want our children to have better lives and opportunities than we ever had and want to give them the best of everything. Driven by a natural instinct to love, nurture, and provide for them, we run the risk of overindulging or spoiling our children, which can have dire consequences for their future, as it may prevent them from reaching their full potential.

When children are deprived of the opportunity to be self-reliant, they develop a sense of entitlement that shields them from the desire to work hard. Overindulgence can lead to a loss of motivation, which comes from having every whim satisfied and never having to take care of basic needs for themselves.

If we want our children to grow up to be financially responsible adults, we must introduce them to the fundamentals of personal finance from an early age; they should have some basic understanding and practical experience in spending, saving, banking and investing.

Teach them to Save
One of the simplest ways to encourage a responsible attitude about money is to encourage children to save. Little children get excited about their “piggybank”; this traditional first savings method helps to build initial interest. Today some piggybanks have various compartments for saving, spending, investing and giving; the children can then decide where their money goes.

Saving Towards Goals
Teaching children to set specific, measurable goals encourage a sense of motivation. Very young children tend to lose interest in goals that take too long to achieve. For them, set modest, attainable savings goals. Over time, your children will learn to become more disciplined savers and can save for longer-term goals for large-ticket items like a camera or a computer.

Teach them to Budget
Learning how to live within one’s means is an important aspect of daily life, and creating a budget is one of the best ways to achieve this. Sit down with your children and go over their wants and needs.
Take them to the market or grocery store, and explain how you compare items based on price and quality.