How to teach your kids about finance?
Money is important in creating affluence and sustaining resources towards bigger success. Microsaving -smaller blocks of investment, can be utilized to build buffers, and can be accumulated to realize bigger dreams.
Every individual needs an orientation and detailed awareness about investment and wealth generation. Small saving habits, passion to invest incrementally at each stage and reaping gains on investments made—i.e. “claiming bonuses” & “booking profits” or “periodic withdrawal of incremental values additions registered on principle investment” are some of the wiser investment strategies, which can be only learnt with experience.
Goal –based investment, is a motive based investment strategy that follows investment, in smaller amounts, in different asset classes; to meet sequential expenses, on life term events, such as education, professional education, marriage, fixed asset purchase, vehicle-automobile purchase, property purchase, insurance and preventive health checkups, life-style expenses and other life-long expenses.
A child mind is a budding nursery of dreams and aspirations. Baby steps need direction and advice on caution, in course of a sequential learning, to bigger successful prudent investment. A child needs more directed effort on realizing the importance of money, a better mentoring on financial planning and investment management.
A list of points shared hereunder, should improve your ward’s understanding on managing finance, in a better manner.
#1. Start by Sharing Importance of money to your ward
A child needs to be advised with careful selection of words to highlight importance of money as starting point of next cycle of money generation in economic activities. This representation should clear speculation and highlight that money begets money. Small learning in confidence can be beginning steps to great success stories. This means that your child would be, then, more aware about wasteful expenditure and be able to avoid them more effectively.
#2. Help your child reach small goals with goal based investment strategy
You can help your child reach better investment decision and good planning, on both periodic investments and contingencies, by linking investment to an expenditure requirement. You can save technicalities of goal based investment to later age, when your ward reaches a maturity age or when the child decides to make a goal based investment with an investment consultant.
#3. Help your child realize importance of income with seasonal jobs in education term
The adolescent mind, can be moulded with little care & counselling, on practical aspects, and cautions in seasonal jobs. The value of hard work and value of income earned, after dedicated work, is an awesome feeling. You can help your child realize the value, and importance of regular income, from seasonal jobs taken in education term. This income stream would be able to keep your child motivated on importance on full term regular job in college –early career years. Further, your child would be able to learn about different investment option, asset classes and investment planning strategies, as income stream, from seasonal jobs is earned in education term.
#4. Improve your child’s motivation
A child’s thought process, is immature, and requires accurate mentoring, on finer aspects, to avoid financial planning pit-falls, and financial mistakes. Small rewards register pleasant memories, which pave way for good conduct. You can provide token rewards to your ward on every small saving achieved. The capital thus saved, by your ward, from pocket money allowances, part time jobs, seasonal jobs, can be utilized, to reward your ward. This should be able to improve your ward motivation, on small and systematic savings, to meet larger planned expenses, on later date.
#5. Importance of Effort and Hard work in Capital Generation
You need to help your child realize the importance of hard work, and effort in capital generation. These important lessons, can be shared in small little talk sessions, with your wards to maintain sanctity. Leading these discussions, by sharing relevant examples, is another way to reach better conversations.
Also, the shortcuts to avoid required effort in a task and pitfalls should be clear in your ward’s mind to avoid future losses.
This means, that your ward, should be able to make distinction, on the right effort, to reach meaningful contribution, on creating income.
We hope you enjoyed this article. For regular updates from the world of financial markets, subscribe us via email and we will deliver our next update right in your mailbox!