Raising a financially responsible child is very important these days.
We know that you love your child and want them to have everything that they want.
It is important as a parent for you to raise children who are financially responsible. This not only helps them to understand the worth of money but they ultimately grow up saving for their purchases. In the initial years of saving, you can teach them about it by asking them to save a portion of their allowance. If they can achieve the target, you being a parent, can reward them with the purchase that they were dreaming of.
Raising a financially responsible child is very important these days, the world is getting complicated and the cost for education and every other thing is increasing at an alarming rate. You can think about hundreds of reasons why it is important to make your children money-savvy.
In this article let us discuss some ways in which you can help your children become financially responsible.
Start early
If you wish to raise your child as a financially responsible individual, then it is important to start from an early age. This would help them to grow up with all the financial wisdom. But financial matters can seem complex to youngsters, so make sure to simplify it for them so that they develop interest and find it fascinating. This is much-needed and is contrary to the previous notion that money matters should not be discussed with children. You should not only discuss money with them but also ask for their opinion so that they develop a sense of responsibility about the matter too.
Be honest with them
Help them understand that borrowing money i.e. loans is never a solution to backup spending habits. As a parent, you need to empower them with honesty and openness, while talking about money matters. Be clear and honest about your financial status and your debts; why you had to opt for a loan. Ideally loans should only be procured as the last resort, instead, they can plan to invest smartly, so that they accumulate enough funds for purchases. Investing in mutual funds can be a great option in this regard.
Help them understand the value of money
We know that you love your child and want them to have everything that they want. But doing so, you would not be able to make them financially responsible. Do not provide them with anything and everything whenever they ask for it. However, you can choose to reward them for tasks done. This would make them understand that money does not come for free and it needs to be earned. If you have a teenager at home, ask him/her to do a part-time job for pocket money, unless of course, it interferes with their study times.
Help them to start with investment options
After providing a monthly allowance, you should track how your child spends the money. You can guide your children in ways that help them to spend their allowance effectively. You can talk to them about investing in mutual funds or opening a savings account that would yield them some additional interest. It is not practical to assume that young children will show interest in any kind of complexities related to investment. But you need to inspire them and lead by example.
Start a Mutual Fund SIP in the name of your child with as less as 500 INR each month, to set them an example. And once they receive the compounded money in their account after the specific time, that sense of reward will surely get them fascinated. This, in turn, will arouse their interest in learning more about investments and Mutual funds to save more money.
Market experts assert that mutual funds like SIP, are great when you want to invest keeping a certain purchase goal in mind. These prove to be more effective when you start early; besides, the amount that you can invest can be scaled up as per your convenience. With so much flexibility to save and earn more later, you can inspire your children to consider mutual funds as they grow up.
The importance of gratitude and giving
This is one of the most important lessons that you can give your children. They should be able to appreciate what they have and give the same to others. You can choose to use all the available opportunity and help your children to formulate this behaviour. You can encourage them to donate a portion of their allowance to charity so that they understand the feeling of gratitude. Give clothes, money and other stuff to your favourite charitable trust and make them watch the action so that they can get encouraged as well.
While keeping in mind all of these things discussed above, you must also take care to do the following –
- Ask them about their wants and desires – it will easier for you to guide them with the right kinds of investment option. For instance they can benefit more in the long-term by going for mutual fund SIPs since compound interest rates apply to these.
- Tell them that investment decisions cannot be taken in a rush – It does take time to get good returns. Their patience would also make them responsible for their finances.
- Empower them to understand is the priorities of money – They should be able to earn the money before they think about any additional expenditure. Children these days tend to buy a lot of things due to peer pressure. These are the things that they would not really need, but they do buy them as other children possess it. You can help them understand the worth of money in this way; that earning before spending is so much more important than giving in to peer pressure.
Final words
With these small initiatives, you would be able to create a better future for your child and they would grow to be financially responsible.
But the most important way is to lead them by your own example, rather than just telling them about it.
That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.
With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh
