It is said that the mother is the first teacher of a child. You have to run behind your little son or daughter to get them to sit still and learn as they desist from learning things! But along with teaching your child daily etiquette, educational subjects and other things, you need to teach him/her the importance of money and saving.

They say - money doesn't grow on trees. But if it did the only way to see it bear fruit would be by letting it grow and not pulling it off the trees and spending it unwisely! This is a basic concept which we as adults understand and we should try explaining to our kids, so they understand the value of money. In this article, we give you reasons why inculcating the value of money and the importance of saving and investing to your kids, in a simple and fun way, is essential for them!

Set aside time

Every week, set aside some time to spend with your child wherein you can start explaining the concept of money. Spend this time wisely, by being interactive and getting your child to ask questions about money. The more fun you make it for your children, the keener they are to learn and retain these teachings! You can get them to make their own money by using paper and paints, which they can use to buy things in the kitchen like an extra cookie after dinner. If they are of a slightly older age ask them to do some simple household chores, then show them how by doing simple things like making beds they can earn some play money just as you earn money!

Saving before spending

Once your child is clear on the concept of money, you should introduce him or her to savings. The best way to do this is by giving them a piggy bank! Show them how they should store all the money they receive into this little magic box which when full and opened gives them far greater amounts. If your child is slightly older, you can even set a date to go open a savings bank account with him/her and explain how it works, and show him/her that all the money he/she saves every month in the piggy banks, will go into the bigger bank which will get added together every month. After all, a bank is like a bigger piggy bank, isn't it? Once your child has seen how the quantity of money increases by saving, he/she would rarely be enticed into spending it elsewhere!

Going for goals

You might think your child is too young to start setting goals, but think again! The financial goals you set for your child are different from what they as children desire for themselves. Children can only think of toy planes, remote-controlled racing cars and kitchen sets or expensive dolls, whilst you as the parent think of their college education, marriage, etc. Yet just because their goals are different does not mean we should neglect them. On the contrary, it is best if we ask our children to identify what they want and get them to plan to buy it. This method reinforces the concept of savings and also strengthens the child's inherent independence. And how do we achieve this? You can make this a fun activity by getting them to draw out what they want for this year (short-term goal) and something they would want within 5 years (long-term goal), and using some basic math help them understand the price and how much they would need to save each month to achieve these targets of expenditure. This would boost their confidence in themselves, as they would feel capable and responsible for their savings as well as the end target they want.

Urge to splurge

All humans have an urge to splurge. For women it is known as retail therapy! However, you must practise restraint and show your child that money when saved and not spent is money accrued through means of investing. It is ok to buy the occasional toy, but not spend money every week buying more toys. The best way a child learns is by watching and observing the parent. Whatever the parent does, the child follows the same. So go ahead and save, save, save...because your child will learn to do the same too!

Basics of investing

You may be aware of the basic tenets of investing, but how would you explain it to the children? Complicated terminology will surely go over them, so it's best once they have opened a bank account to start them off on maybe a fixed deposit, or even a mutual fund. However, there is a simpler way. You could inculcate the habit of saving and investing in your child by encouraging him/her to 'invest' with you. Here you act as the bank/fund by keeping your child's money and returning an increased amount within a stipulated time period. This game would help children understand the benefit of investments and get them started on the right path towards investing for themselves. Teaching children to invest would prove beneficial as it will instil in them the habit of investing, and as the term duration grows they will see how the returns on their investments grow, and this will attract them towards savings and investments as opposed to spending.

Stay focused

Now that you have explained not only the value of money, but also the concepts of savings and investing to your children, you should remain dedicated and focused to the cause, as children tend to lose interest fast. Maybe you can set aside time once a week, where your child and you can collate the money saved, see how much you've spent, outline how much closer is your child towards achieving that cycle he/she is saving to buy, and once you've started him/her off on a fund you can track the growth together. Introduce a new way of spending quality time with your child, by teaching him/her the value of money, and showing how it grows when saved and invested wisely!