Money management is what everyone should learn, as a dedicated course. We are always directed towards getting a job, making money, doing a degree, but no one actually guides us how to manage that thing well. And, as we know, becoming rich has nothing to do with the quantum of resources at our disposal, but with the wisdom to manage the money well. The reason poor tend to remain poor is due to their poor money management skills, and of course, the lack of zeal to thrive for valuable stuff settling in comfort zones. But that’s another topic. Let’s stick to the fact that financial management, or money management has a lot to do with our psyche, the way we perceive value & the manner in which we manage our desires vs our needs.
But what are the aspects the children can get exposed to, to teach them money management –
- Make children understand the difference between the needs and the wants – Wants extract money out of pocket unnecessarily. One should be able to afford to spend on wants, only after spending on needs, investments and savings, in sequence. Helping children understanding difference between needs and wants, make them wise much early and direct towards more wiser lifestyle down the line
- Make children manage temptations – One who can manage temptations, and not get swayed by them easily, can only manage the resources well. The one who can not, will get all leaked. Managing our temptations is an important element in managing money, as there are plenty of avenues out there trying to pull money out of our pocket, and if we just get drowned into our temptations, the whole fortune can come to an end
- Make them understand the value of things, and value things rightly – We all know things are valuable, and when we just spend on stuff we don’t use, we literally burn that money which could have been used on other worthy stuff. Understanding and respecting the value of things is a must. And over and above, valuing the things rightly is also equally important. One should be wise enough to give a price tag as per the true value of the thing, and not just overpay for something that isn’t very valuable. Learning value is key, so have good discussion around value of things with children all the time
- Make them learn Assets, Liabilities, Income and Expenditure – Exposing them to these terminologies and describing framework how things work, will help them at least to get the initial sense of things, to develop further later on when they dwell into them deeper. Expose them to “Rich Dad – Poor Dad” story and help them explain terminologies and related cause-effects. Make a point to them, to build assets and reduce liabilities, Increase income and make an avenue of passive income down the line. Make them save their money, and incentivise them for saving their money. Be a little bank to the child (of course it does not take any RBI license)
- Make them work hard to earn their own pocket money – Give them pocket money so that they get first hand experience in managing money, but in between, make them work for their pocket money. Otherwise, they would take it as granted and consider it as entitlement or an easy affair. Earning is hard, spending is easy. This has to be taught to children, without which, they can’t be good money managers
- Teach them not to compare and be perfectly fine with what they have – We spend or get fallen for ‘wants’, when we compare ourselves with others. Especially lifestyle. We need to teach this valuable lesson that never compare and lead your life your way. Spend, but spend wisely so as it builds your investments and assets first. Comparisons drain our resources a lot
- Teach them not to live a life of show off, but of resourcefulness. Not to live to impress others – We are rich in true sense only when we have resources at our disposal, and not by mere showing off even while not having much. Be rich than pretending to be rich. Making them aware of this showing off tendency early in life can correct their psyche to a large extent, saving them from misery of showing off life and poor money management attitude
Money management has less to do with money, and more to do with our own handling of our thoughts and emotions. We screw up in our thinking, we screw up in managing money. That’s the primary reason that those who were not that rich initially, had grown up to be richer down the line than those who had been born with a golden spoon. At the end, it’s not about what resources one got born with, but how beautifully one manages those resources.
Give examples from their own lives to what they can relate to, going at a level they can understand the importance of things. Let’s sow money management seed well in advance, so that they truly enjoy their life, than draining out money on liabilities or living a life to manage bills…
