MAKE YOUR CHILD FINANCIALLY LITERATE
Making your child financially savvy is not as simple as giving them an allowance. Every parent should instill proper money management and its significance to their lives. The following tips can help empower your child’s financial literacy.
Impose a Challenge
Giving an allowance and enforcing a savings plan are good, but not enough. A savings account is useless if the kid is too young to understand its importance. Parents can relate money to their child’s reality, and it requires an ounce of patience and creativeness. Do not act as a friendly bank to your child. You do not want to spend your money on anything whenever your kid asks, right? Make him understand the fine line between needs and wants.
Reward Children the Right Way
There is nothing wrong with giving a reward, as long it is done the right way. Set the context in which rewarding would be proper. The best way is to make it a bonding moment for you and your child. For instance, if he aces all the exams and you want to go beyond the "I’m very proud of you" remark, bring him to his favorite restaurant, buy a gift, or do something you both enjoy. In other words, do not just give him cash. Your presence and appreciation matter more than monetary gifts.
Turn Chores into Valuable Lessons
Picture this: Your child badly wants a pack of M&M’s and has not stopped asking you to buy that chocolate. Remember, children are troopers in nature; therefore, they will never get tired of persuading you to get something even if you refuse repeatedly. Instead of giving in to their cries and pleas, challenge your child. Explain to him you have a limited amount of money for grocery items. Write down or give your child a shopping list, give him a set amount of money, and let him keep the change if they can purchase all the items lower than their given budget. During the process, they will realize to be thrifty because of an immediate reward at the end of the exercise. If they become successful, they can use the cash to buy something they want or save it for later.
Teach Them Well about Credit
The earlier you teach him about credit, the better. You can serve as your child’s creditor. For example, he wants to buy a bicycle. Take him out to different bike stores, let him shop for the best price, loan terms, and repayment plan. The scheme works very well if you truly act like a bank. Depending on the amount of interest you are charging, you can split the payments into how much is given to you along with the principal every month. Make this arrangement as formal as possible. Prepare the loan agreement and have it signed by both of you. Forget not to place some consequences for non-payment.
Such credit will jump-start your endeavor to emphasizing the lopsidedness of credit cards when he want to apply for one someday. That way, he will be more reluctant to get into the practice of charging things up[on realizing he might end up paying for a particular item twice over. Try also to differentiate between good reasons and bad reasons for obtaining loans.
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