When it comes to teaching money management habits to our children, we either procrastinate the entire subject, or we feel it is not the right time to talk about money to our children. Unintentionally, we lose the most significant element that makes most people wealthy across the globe i.e. Time leverage.....read on..
80% of America's millionaires and 70% of all global millionaires are first-generation millionaires, ie they created wealth in their own life span and did not inherit anything or got it via lottery. When we analyse the data across all these millionaires, we realize that the biggest factors that they leverage to build wealth is the concept of "time leverage"
And what better age to teach children about time leverage than when they are in school. They have the time on their side. Rs. 500 per month saved from their pocket money, can make them millionaires in 30 years - that's the power of time leverage. But if that is so simple, then why is not almost everyone a millionaire. This goes back to the same old beliefs that we have seen for generations, and follow them with our sub conscious mind.
So, i thought of taking this initiative to our upcoming generation as one of the give backs to my society. Started with my own kid's school.
In one such seminar conducted on 30th Aug at Queen's Valley School, Sector-8, Dwaraka, on the topic of "Financial Wisdom for Youngsters", we discussed and interacted on the importance of learning good money management habits from a young age (starting from their pocket money) and how these habits can continue to benefit them for the rest of their lives.
It opened up the student's minds and was extremely well received, by the students, teachers and the principal herself. The below acknowledgement letter from the school principal is self explanatory.
School curriculum miss out this fundamental life skill of how to manage money well. Do not be shy. You are getting your child educated in the best of the schools, asking them to compete in this world, giving them industry knowledge - all with just one aim - so that they are able to earn well and take care of his / her family. Along with this, if we teach them to handle money well from a young age, that can change their fortunes by the time they got to the age of doing a job.
They will work for the love of their craft rather than for the need to earn money.
Go on, engage yourself with them on basic money management habits, some of which are listed below:
Save, no matter how small – Guide your teen to save money out of his/her pocket money or money received through gifts. The idea is to inculcate the habit of saving in them from a tender age. Whether it's a little or a lot, open a low-fee savings account with a bank so that you can personally monitor their savings. Nowadays, banks are offering savings account for your children with features like net banking and ATM facility. They also have security features to prevent overspending and misuse of the account, so go ahead and get one for your child.
Make them spend within a Budget – Based on the average cost of clothing, entertainment and gifting, provide a specified amount per month to your teen. Ask them to manage the entire month on the limited budget they have, which will make them more responsible towards money.
The power of compounding - Your teen might have learnt the compounding theory in books but it's time to make them learn in reality. Use an online calculator to show your teen how compounding works so that they just don’t save but grow their money.
A strict ‘no’ to credit card – Make your teen understand the dark side of credit cards as it is no free money. They often lead you into a spending spree, and into debt. Credit cards are good if used wisely though, but they might turn out to be destructive weapons in your teen’s hands.
Let them achieve their own goals - It’s a good idea to let your teens pursue and achieve their goals on their own like buying a gadget or enrolling into some kind of training. Instead of paying on their behalf, ask them to save and pay for their goals, if not fully then partially. This will bring them a lot closer to systematically work upon their goals in the future as well.
Let them experience poor budgeting- Allow your teen to suffer the consequences if they have made poor financial decisions. Instead of giving them excess money, ask them to cut on their own expenditures for the remaining days like no eat-outs with friends and movies just because they have spent their money in shopping. It’s much better for them to learn this now than when they will have to deal with bigger responsibilities in future.
A financial plan will work at its best if the entire family is in sync with it and therefore making your teen understand the same is an important aspect. The above steps require time, effort, and patience from the parent, but they provide experiences that make the realities of personal finance far more manageable to your teenager.
If you need any help, do feel free to write back to me, and i would be more than happy to help.
Cheers
Manoj Arora
Lead a Financially Free Life !!
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