A successful parent is not when their child gets a great job in a big company with a huge salary nor when their kid has great values. It needs to be all of it – If your child does not have some qualities then you as a parent might think that you have failed. One such area a child needs proper care is money management – They cannot spend money as and when they want and how much ever they want. They need to understand the importance of money and how to save it.
At the basic level when your child is old enough you can give them allowance or pocket money which they will have to use for any expenses the whole month. Start off with minimum amounts as they are bound to make mistakes where they might spend a lumpsum on something at the starting of the month and forced to go frugal the rest of the month. The next month your child will think about planning ahead for the month.
The Next Step
Once your child has mastered their allowance its time to move to a bigger stage – Credit and debit cards.
Credit cards and debit cards are useful tools and like any tool when used smartly can bring a lot of good but can cause a lot of trouble in your financial life if not used appropriately. It is best to start early with kids and teach them about credit cards and debit cards before they get one of their own and get into trouble.
Additional Reading: Debit Cards for Students
It is also good because once your children complete their schooling they might get a college away from you where they might need money from time to time. It is also easy for you as a parent to transfer money to their account and also have tabs on where and what your children spend money on to make sure they don’t get into any bad habits. Even here it is best to take it step by step when teach your children by starting with a debit card and then moving on to a credit card.
Debit cards
When it comes to plastics debit cards are the easiest to manage as the money used is the money you have in your account. A debit card can be acquired very easily by just opening a savings account which needs a minimum balance of Rs.1000 to Rs.5000. Now each month you can just top up the amount in your child’s account which they can spend. Your child is now restricted to spend the money that you deposit and plan their spends accordingly. It is also a great way to learn about interest and savings.
Credit cards
Its with credit cards that it gets tricky. Financial management though boring can be made fun if you look at it like a strategy game. First teach them about credit and credit limit, that the child is actually borrowing money from someone else and that they have to repay it in the form of chores which increases if they spend more than the credit limit you have allowed them to utilize. They will start to stay under the radar to make sure they get out of chores.
Conclusion
Teaching kids practically about finance which help them have the experience of handling money in real terms. Credit cards and debit cards can help with your teaching process as the usage of which simplifies a lot of the financial concepts.