Parenting strategies: How parents can teach money management to children?

Today, when parents withdraw cash from ATM machines, children are standing nearby. They want to learn how to withdraw money too. Thus, parents tell their small kids that they have to key in password and the requested money comes out of the machine. In their small world, these children learn to withdraw money and buy chocolates, electronic gadgets and their dream toys. They have no understanding what it means to earn money and how to spend wisely. Later, these kids grow up and become adults. The toys become different now. They are going to foreign trips on parent's money and parents are glad that their child is still respectful to them. The child has become adult now but still demands money. He compares them to other parents who sponsor their child education overseas, give car and provide free electronic gadgets. Finally, the parents breakdown as they don't know how to teach their kid to understand the value of money and earn themselves.

Here are few easy tips which can be taught to kids as young as two years to until they grow up. These small steps can make the story different, with kids becoming financially independent and giving money to the needy.

1. The first tip is give them pocket money only for basic needs like lunch and transportation. From young age, we can teach them that if they need luxuries, they need to do some work. It can be some household chores like cleaning the room, washing the dishes or preparing sandwiches. As they grow up, they need to take part time jobs or do small business or investment to meet their own expenses. It will help them to understand the value of money and respect for work.

2. Please don't use money to compensate for the time you are unable to spend with them. Some parents are under the guilt trap of leaving their kids alone for long periods and try to cover up by buying expensive toys for them. This strategy works against them. Children become used to the gifts and they start expecting more and more. As adults, they expect the world to give them money and sponsor their expenses. This habit puts them into financial debt and crisis during adulthood.This can be replaced by spending good quality time. Good quality time of few minutes is worth more than 100 hours.

2. When kids receive pocket money, share good financial tips with them. Based on Robert Kiyosaki, the financial teacher, he encourages to let the money be put in four different boxes. Giving, saving, investing and spending . Giving is meant for donation or charity. It can be any organisation which you feel is working for a good cause. Saving is meant for big items like cycle, electronic gadgets or any dream toy your child wants. Investing is where we let the money compound, increase and not touching it for longer period. For a start, it could be putting money in a good dividend stock or dividend REIT. Spending is meant for immediate usage for basic expenses.

3. Games can teach a lot more than books. They let you practise and apply the theory. There are good financial education games like Monopoly, Cash flow for Kids by Robert Kiyosaki. These simple games teach some very important money management and cash flow skills. Children enjoy the games and at the same time, they learn good things. This results in strong fundamentals of finance management even before they handle the real and big money.

These small steps will go a long way in teaching your children how to manage and grow money. They will be givers instead of takers in their adult life. When foundation is good and financial roots are strong, fruits are bound to be healthy.