5 golden rules of personal finance your child should know
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5 golden rules of personal finance your child should know

  • Highlights

  • Start by teaching your children the importance of saving money

  • Help to differentiate between wants and needs

  • Inculcate the habit of creating and living on a budget

  • Stress on the importance of creating an emergency fund

Personal finance is the understanding how to be financially independent and prudent, and the steps one must take to invest and grow wealth. Effectively managing money is a great skill to have, and is one that is best grasped at an early age. As a parent, you must focus on inculcating financial discipline in your children while they are young. Encourage your child to handle personal finances better with these 5 finance lessons.

1. The importance of saving

The first financial habit that you should teach your children is to save. Start by asking them to take a small step, such as saving 10% of their weekly pocket money. This will help them develop the habit of saving. You can encourage them by paying a small interest on the amount that they save, just like a bank would!

2. Differentiating between wants and needs

Understanding the difference between wants and needs is perhaps the most important financial lesson you will teach your child. Identifying this difference will help your children make informed purchases in the future and stay away from impulse buys that can harm their finances in the long run.

3. How to budget and why it is important

Budgeting is a great habit to inculcate in children as it will hold them in good stead later in life, when they have to manage several responsibilities at once. While it may seem illogical to a child at first, over time it will become second nature and is sure to have a lasting effect on their financial future, especially with regards to prioritising and making their money go the extra mile.

4. The need to monitor one’s spending habits

Just making a budget is not enough. You must teach your children to ensure that they follow the set budget. To do this they will need to periodically monitor their expenditure and ensure that they are living within their means. This will help them achieve their financial goals more easily and live a more disciplined life.

5. The benefits of an emergency fund

Through life there will be many unplanned expenses such as the need to visit a doctor, or paying for car repairs. In such situations, your children will need to spend beyond their budget and may also lose out on pay if they have to miss work. To tide through such situations with ease, it is necessary to drive home the importance of building a cash reserve that’s meant specifically for emergencies. In case this fund remains unused for a period of time, your children can also use it make a handsome investment.

By adapting and implementing these tips on personal finance, you can ensure that your children grow up to be responsible with money. Also, you can use these tips to mould them into financially aware, independent individuals.

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