Raos Management

Teach your kids financial decision-making

People are creatures of Habits, several child psychologist and financial advisors said what we learn from young affects our lives in the later years. Same goes to money, how we spend and save money is probably picked up from our parents and little bit from here and there. However managing money can be taught from young, here are some tips that might help you introduce your kid to concepts that go beyond putting coins in the piggybank:

Chore debt. One way to do this is by acting as your child's credit company and offering an advance on his or her weekly allowance. Instead of giving pocket money at week's end for chores he or she has already done, consider "fronting" the allowance for work you expect them to do. "A lot of younger kids don't follow through, and parents sort of expect that," says Katz. "So when the child doesn't do his end of the bargain, tack on an interest in the form of additional chores for the following week." The lesson may take a few weeks to sink in, Katz says, but it's a sound way to prepare your offspring for the real world. Parents give their children an allowance anyway, and chore debt actually teaches them how to manage their money without lecturing by the parents.

Seven buckets. To present to your child the idea of savings, consider setting up Seven  jars says a Financial expert Mr. T. Harv Eker: (This idea of Jars were collected from several books and experience by others especially those with sound financial knowledge and background), I coined the term " Savings for a Brighter Day" 

1.Necessity Account 

2.Long-Term Savings Account

3.Saving for Brighter Days Account 

4.Give & Charity Account 

5.Financial Freedom Account

6.Fun Account

7.Education Account  

Once this jars are set , then, pay your child for each separate chore he or she completes, and teach him or her to put a portion of the money in each jar. For example, if your son wants an iPod, tell him he can buy one when there's enough money in the "Long Term Saving Account" jar.

Necessity Account is used for buying school or educational material., Its a concept to inculcate responsibility like for e.g. As adults use this account to pay bills, car loan, food etc. 

Teach kids to save for brighter days not emergency days because according to the Law of Attraction saving for rainy days creates rainy days. So why not save for brighter days. In case of emergency you can also use your Long term Saving Account. 

Children have the natural habit of giving, so get them into the habit of saving a portion of the money for give account. They can use that money to give or buy presents or give donations. This has to be done with supervision.

The Financial Freedom Account or investment account is for them to save for the future for business ventures or Investments. This has to come with some maturity and guidance as they grow. 

Children love play and fun so reward them to enjoy the money from fun account once in a while, blow up this account and just have fun, like going for movies, games, outing. 

Finally the most important account, education account, the money will be used to  send them for seminars etc, since they are in school they can use that money for educational trips, seminars etc. 

This methods can only become habits if they are taught young and with constant follow up, in fact even parents can learn and practice together while educating your child.  

All together. For younger kids who may not understand how you can afford some things and not others, introduce the concept of "you" versus "us." Emphasize the point of making a purchase for the entire family, such as a new flat-screen TV, as opposed to something only he or she wants. Be sure to explain the purchase in advance as well as the sacrifice mom and dad had to make to buy it.

Talk show. "Open a dialogue with your kids about the temptation and perils of spending money that you don't have," says another Financial Expert Mr. Katz. This may be especially useful to older children, such as those headed for college, who might be offered a credit card the first day on campus. You can prepare them for that moment by making them responsible for paying their own cell-phone bill or by buying them a cell phone with a prepaid limit on their minutes.

It is very important to teach kids money management. If they learn these techniques early they can grow into adults who can make wise financial decisions. This should be the goal of every parent so that they are not constantly bailing their children out when they are older. Some parents do not take time to teach their children the use of important lessons in life regarding finance and its related matters. So, do take some time to indulge in this.

Thank you and happy teaching.