As children grow, they begin to understand what money is by observing us buying toys and chocolates for them handing over that colored paper to the shopkeeper, which is called “money.” While they start realizing that we need money to buy things, it is equally important to help them understand that they cannot buy everything they want, and that not everything is worth buying.
In my opinion, it is never too early to start teaching children about the value of money and the importance of saving.
There are several ways in which we can encourage our children to understand the concepts of budgeting, saving, and investing.
To begin with, on a child’s birthday, we can gift them a piggy bank so they start saving a fixed amount every month. It is important that children get used to the idea of allocating money for spending, saving, and sharing at a very young age.
At a certain age, children are heavily influenced by their peers. They may become more aware of high-priced sneakers or designer jeans and may strongly desire such items. This presents the perfect opportunity to help them set financial goals. If they wish to buy a big-ticket item such as a video game or designer clothing, we can guide them to write down a savings plan and work towards it. These experiences help reinforce the discipline and satisfaction of saving.
We can also have family discussions about finances, such as paying for the house, groceries, fuel, or vacations. As parents, we must lead by example in the way we handle money. For instance, when children are young, we do not need to buy them expensive designer labels. Even if we can afford them, we should avoid sending the message that the most expensive item is always the best, or that money can buy happiness. Children rarely notice the label on the back of their shirt but they do notice our values.
Rewarding children for their savings efforts through small incentives can also be motivating. For example, we can match a portion of their savings. Involving them in planning the family’s monthly budget can further deepen their understanding. Sitting down with them and discussing how they might spend their pocket money will teach them planning and prioritization. This will not only reduce unreasonable demands but also prepare them to manage their first paychecks wisely, without impulsive spending.
The concept of budgeting should be clearly explained. I remember managing an entire month on modest pocket money simply because I had set a budget for myself and never exceeded it. I knew my funds were limited and that additional allowance would not come easily. These are the same principles we must pass on to our children. By doing so, we discipline their spending habits and equip them with lifelong money management skills.
I would like to conclude with a simple poem for the “little ones”:
The Baby Kangaroo
“My baby is a bright one,”
said the mother kangaroo.
“With money in my pocket,
he knows just what to do.”
He counts the nickels all by fives,
The dimes he counts by ten.
And if they drop, he quickly
picks them up and counts again.
Each time I give my son a coin,
he always hollers, “Thanks!”
And when he’s got a lot of them,
he puts them in his bank!
