Mr. Mahitosh Patankar, parent of Mihir Patankar, Grade 3, Ekya School, ITPL shares this insightful, informative blog that addresses the issue of how children do not really understand the value of money today. He points out the fact that in today’s scenario, digital money or plastic money gives our children the perception that money is an unlimited resource, thus making them forget the value of it.
Teaching children to manage money
“Frugality includes all the other virtues.” –Cicero
Managing money has always been an important skill. The more financial savvy your children are, the better spending decisions they will make throughout their lives. We have all been through an age where money was touched, felt and valued. It was mostly paper money. But now with Debit/Credit Cards, Mobile Wallets, and Internet Banking, children don’t see currency and coins. Online shopping is a secret genie with one-click checkout, to make an item appear at your house “There are some things money can’t buy. For everything else, there’s MasterCard”. You would all have been in a situation where the excuse for not having money is countered with “Take it from the ATM”. Bingo! Isn’t it?
This invisible money gives the impression of an unlimited resource. Preaching doesn’t work today and it is best to get our kids involved in money management as appropriate with respect to age. Children from the age of 3-4 years can start to understand the concept of saving and spending. The importance of money can be taught early through real-life situations. Eg. When in an ATM, we can talk about how money is earned through hard work and when in the supermarket one can ask “What is expensive? What is really needed? How do we compare?” to evoke concepts of thoughtful spending. These help sow seeds of money management in our child’s mind.
Children are curious and want to show that they have grown. Make them involved and responsible for budgeting and financial planning. For instance, they plan what things are required and make an appropriate list for a supermarket visit or decide the number of dinners/family outings within their given budget. It makes them feel valued and encourages thought process around money management. If the child is too young, he/she may not understand the concept of investing and interest rates but we can give them piggy banks/container for Saving, Spending & Sharing – where they put their allowances equally in these containers. It is a very easy way to learn the importance of saving.
They can ‘spend’ for their candy or a book or a ball and ‘save’ for a more priced possession until they can afford it. It will usually be a more expensive item than candy or chocolate. It helps them learn delayed gratification, the importance of being patient and about savings & accrual. They intuitively start counting whenever money gets added in savings and gets removed from spending to see what is left, putting a value against money.
The ‘Sharing’ jar will help understand philanthropy, donating to the needy or a cause and make them a compassionate human being. Trips to the supermarket or shopping can be used to help make your child a wise consumer or smart buyer. You can show that you can shop around and see a cheaper and expensive product and save by making the right decision comparing price, quality, and quantity. It would be a good idea to take elder kids to the bank and open an account. This will introduce the concept of interest/credit and how money grows & income can be generated. Teenagers can learn how credit is used by businesses/entrepreneurs and how to make wise investments. Essentially, creating learning opportunities at every age/step is the key to develop this important skill from a young age to adulthood.
As the saying goes – Before you spend, earn. Before you invest, investigate. Before you retire, save.
A brief profile of Mr. Mahitosh Patankar:
Mr. Mahitosh Patankar is a senior IT professional working with British Telecom, managing Product Development. He has completed his Engineering from IIT Madras and Management from IIM Bangalore. He is active in voluntary work and loves singing, traveling and camping.