| As
part of financial education given to the child,
the child must be taught on how to work on a
specific budget. ‘Budget’ is defined
as a specific amount of money available in one’s
hands to spend and save over a fixed period
of time.
Budgeting
involves the concepts of income, spending &
saving. The concept of income can be easily
introduced by giving ‘pocket money’
to children; spending can be defined as ‘
expenses on school canteen/ friends birthday
gifts, weekly outing’, which can be done
using the pocket money. Lastly, the concept
of ‘saving’ is critical to be taught
to children in the sense that parents must explain
to children that money given is not meant to
be spent immediately; a part of the money needs
to be kept aside for later either exigencies
or planned ‘bigger’ expenditure.
The
single most important component of ‘ budgeting
exercise’ is ‘saving’. That
is because, unless children understand the importance
of spending in a controlled manner, they will
inculcate the habit of ‘ unlimited spending’
and hence grow up to be financially un-savvy
persons. An easy way to incentivize children
to save can be by deferring purchase of their
desired game/toy/ apparel/book. For eg: If the
child wished to buy a Barbie doll worth Rs.1000
and you as a parent follow the policy that children
should be given gifts only on an occasion or
when they do well in academics, etc; then you
can explain to your child that she needs to
set aside a certain sum of money from the monthly
allowance been given to her. That money can
be put into a fixed place in the house very
month/week and demonstrate to her how the money
is growing over a period of time. Once the money
equals the amount required to buy the Barbie
doll, you can buy the gift to your daughter.
With this, she will not only appreciate the
importance of saving but also know that ‘saving
over a period of time leads to fulfillment of
desires’.
Linked
closely to the savings piece is the concept
of spending. The easiest thing to do for any
human being is to spend the money earned! The
important thing that children should be taught
about spending is that money available must
be spent intelligently. Most people have available
only a fixed amount of money. With this amount,
they need to meet their daily needs and also
fulfill some desires. They also need to save
some amount of money for the future. Children
must be explained this in a way which is of
interest to them. For eg: at any point in time,
if you ask your son/ daughter on what all things
they need/ want to buy, it is easy to draw up
a long list. Ask them to put the items in order
of priority. Then split the items into ones
that you will buy for them and others that they
need to fend for themselves through their allowances.
Of the items that you will buy for them, again
decide which all will be bought immediately
and link the others to a birthday/ examination/
sports, etc. Of the items that they need to
buy, fix the items they can use their allowance
to buy immediately and list down the others
for which they need to save money periodically.
Income
in the case of children largely refers to the
allowances that are given to children on a periodic
basis. In the early years, the allowance is
largely fixed, and as they grow up some portion
of the additional allowance can be made variable
linked to the children doing some household
chores, excelling in fields or even practicing
the values that parents want to inculcate in
their children.
Some tools that parent can use to help their
children understand ‘budgeting ‘
better are detailed below: |
