As a parent, financial prudence is one of the most important life skills you can teach to your kids. Children who understand the value of money grow up to become responsible, adaptable individuals.
Money management lessons become especially vital when your child is planning to study abroad. For many children, this will be their first independent experience. It can be an anxious time for you and your child as you will not be around to guide them. It is thus imperative that you shape their financial decision-making and approach towards money management in a way that will hold them in good stead not just now, but throughout their life.
Here are 5 ways you can teach your child the value of money:
Budgeting basics: The foundation of good money management rests on judicious budgeting. Get your child started with the basics of a budgeting exercise – how to create a monthly spending plan – and, more importantly, how to stick to it. Give them easy-to-follow rules of the thumb, such as not to spend more than 30% on food, or to save (let us say) 15% for emergencies. Help them create a budget that is pragmatic and works for them.
Prioritising expenditure: This method requires practice and diligence. Talk to them about how important it is to keep track of their expenses and not to overspend. Using budgeting apps can help them track expenses and ensure that they do not have to borrow money from friends at the end of the month. Show them ways they can save money, such as renting furniture instead of buying, or cooking meals rather than eating out frequently. It is easy to get influenced by friends and their lifestyles, especially when living away from family. Explain to them that spending without thinking is a slippery slope.
Earning to cover expenses: While you would be footing most of their expenses, encourage your child to take up a part-time job. They can use this money to go out with friends or take weekend trips. They can find a job on the campus itself as a teaching assistant, computer technician, or an administrative assistant. Or they can take up a part-time job at a local restaurant or supermarket. They can also consider an internship with a company that is relevant to their field of study.
Art of saving: A penny saved is a penny earned. Saving is a skill that can help your child succeed in life. Explain to them that saving small amounts regularly can quickly add up. They could talk to their banks abroad and set up an automated system (like recurring deposits) where a set amount of money is deducted from their savings account every month and deployed in a secure fixed income investment. With the interest earned and the magic of compounding, they can be a step ahead of their peers even before they start their career. They can use this corpus to fund their further studies, put down a security deposit for a rental property, buy a car, or take a holiday.
Wiring them money on a fixed schedule: This is something that you, as a parent, can do to help your child. You can support them financially from virtually any part of the world. To do so, fix a schedule and send them money via a reliable and prompt money transfer service such as Western Union. Tell them when to expect the money – fortnightly or monthly, in a way that sits well with their recurring expenses – so that they can budget and plan accordingly. Discourage ad hoc demands of money.
As your child prepares to step out of the comfort of their homes to start living an independent life, help them build financial discipline. The sooner they adapt to and utilise money management skills, the better are their chances of flourishing and becoming financially successful.