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Friday, December 11, 2009

Edition 4- Money & Savings

How does A for Asset B for Budget sound? Too heavy for your child? Not much, I would say only if your child is aware that C also stands for cash and S for savings! In todays fast lifestyle, an Apple a day goes on the optional list but the cash that we spend for our daily billing is non optional. And this cash essentially comes from our earnings and the saving that we manage to do.
Unfortunately in todays environ-ment, where some parents try to substitute “their time” with expensive toys and gadgets bought with “their money” , we cannot blame the child for not exactly understanding the importance of money and savings. The moot point here is not whether we can afford it but making our children understand whether they need it and that there is more to money than just spending it freely. In this regard, being a role model yourself is the best way to teach your child how to handle money. If your actions and words show a healthy respect for money, your child will surely follow suite. Give your child pocket money, but not before you make make him understand that the allowance is part of the overall weekly/monthly budget of the family. And make sure you don't bail him out for that video game or that box of fancy crayons if he spends all of it in the first couple of days. Once the effects of reckless spending become clear to him, small piggy bank savings will automatically follow. Teach your child to distinguish between needs and wants and accordingly help him set a goal to save and then spend the savings at appropriate time. If need be, keep your own piggy bank alongside your children and save the loose change that we have in our pocket at the end of the day. This will encourage your child to save more. At a later stage, give your child the responsibility of atleast a portion of his expenditure. You can do a budget sitting with them which shows things they spend on to show them where all the cash goes. Coupled with good saving habits, budgeting will help him plan his much desired cricket bat or the extra pair of shoes which otherwise may not be possible in his single allowance of pocket money. As good parents , we should see to it that we do not meet all their demands. Having said that, please do not overdo the money talk. In certain cases completely refrain from discussing bigger expenses like his tuition fees or school fees even if they are burdening your own budget. Avoid sentences like” do you have any idea how much I working just to…..” , lest your child might develop a guilty feeling about the whole thing and defeat our basic purpose to teach him the importance of money and savings. Remember that inculcating sound saving habits is as important as educating him. And this one takes time and patience. But once learnt and imbibed , your child will recognize it as one of the best gifts we have given him throughout his lifetime. As the great Benjamin Franklin once said : “A penny saved is a Penny earned” .

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