Ask your child to track monthly expenses out of pocket money
The payments ecosystem in India is seeing an incredible evolution. All thanks to the rapidly growing e-Commerce industry and today’s mobile-friendly digital solutions. In fact, with the phenomenal rise in the use of digital payment solutions, most teenagers or kids are also moving from carrying cash to using payment apps for a variety of different transactions.
Even though most of them still get their pocket money as physical cash, but when it comes to payment, they either borrow their parent’s debit/credit card or use digital payment apps. The digital modes of payment are taking over. It, therefore, becomes imperative for parents to make their kids understand how to use various digital payment solutions to their advantage in this tech-driven world.
Parents can adopt a method to let their kids be exposed to the digital financial world is by giving them access to a debit card. However, on one hand, it may not be a prudent approach as kids may develop misconceptions that money can instantly buy anything. But, on the other, the best way to learn new things is through hands-on experience and a debit card can help kids inculcate good financial habits. Well, it can become a great tool for teaching your child various aspects of spending, budgeting, as well as saving.
To begin with, for instance, give your kids access to a spare debit card of yours by transferring a certain amount of money to be used for the month. By letting them manage their debit card balance will help them understand when to spend, how much to spend as well as things they should spend on. It will help them understand how the financial world operates. Plus, when you give them a debit card, you are also acknowledging their maturity as you are giving them a sense of responsibility to take care of a valuable resource that is money.
While initially, they may make a few mistakes and spend the entire month’s budget on a single purchase. However, you can keep track and monitor their spending and savings. Become a guide to them and talk to them about how judiciously they can plan their expenditure as well make savings every month.
The habit of savings comes with practice. So, it's never too early to begin teaching your kids the fundamentals of money management. To help them better understand the techniques of saving, ask your kid to track their monthly expenses. For instance, you can gift them a notepad where they can note down all their monthly expenses. Ask them to do a monthly comparative study to identify where they have gone overboard in a month and areas where they could have saved. In addition, you can impart to them the availability of multiple saving methods. Familiarise them with common saving instruments such as a fixed deposit, recurring deposit, while explaining to them how these money-saving solutions help in compounding a certain amount of money for the future.
In a nutshell, saving is the cornerstone of wealth creation. It eliminates binge spending thereby inculcating more disciplined financial habits. So, your kids knowing financial management at an early age will help them grow to be financially responsible as well as independent adults.
The author is co-founder, Junio
DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.