Parental influence is the most powerful for any child. They gradually learn and get the habits of their parents. As children, they naturally look up to their parents and aspire to emulate them. You can observe this in their behavior. They pick up verbal—and non-verbal—cues that could affect their behavior and the future as well. The same happens with the financial habits. Children’s view of money and the development of spending and saving habits comes from the parents.
The biggest disconnect or the mistake you can say which happens in every Indian middle-class family is most of the time parents do not know that they have wrong financial habits and it can affect their children, and this is the reason they pass on the bad financial habits to their children.
This is the reason for being a parent you need to understand your habits which can affect your children’s financial future.
Good Financial Habits to Inculcate in Your Child
- Talking About Money
Parents should talk about money with their children. Communicate with your child regarding some household finances, spending, saving and planning for the future financially. This way, they can understand the importance of money and gradually it becomes a financial template for them when they grow up.
It is very important because if they don’t understand the importance of money, they will start spending it without thinking and this habit will spoil their future financially.
- Being Organized
Making a budget and following it is the best way to be organized financially. Making a budget, comparing your inflow and outflow on monthly basis, not miss deadlines of your bills and other payments. All these are the ability to keep your finances under a check and in a managed way. If you do all these think your child will also learn the same and hence will have a bright financial future. But if you are not doing this your child will gradually notice all these things in you. If you are not making a budget and not paying the bills on time it will be fine for them and they will do the same thing when they become adults.
- Financial Goals such as Savings & Investments
Planning is the only way by which you can reach your goals. And the first important thing needed is a goal and it is equally important to choose the correct tools which can take you to your goal. The same is true with money. Setting your financial goals is very important. From purchasing a costly gadget to a house, if it is done in a planned manner there will be no financial and mental stress on you.
In the same way, if you keep your money in a fixed deposit for 15 years and expect it to work all the while, it will not. But after 15 years when it matures, it will give you returns.
If parents plan their finances and have savings and investment both in a systematic way, their life will be easy, the kids of the family when they grow up will most likely to do the same for their family.
- Emergency Savings
This is the most important one. Emergencies can come at any time without any prior notice and you don’t have any idea that how much it will cost you. More important what if you don’t have that much amount needed at that time. Hence you should plan for it and contribute some of your money for emergency fund monthly. If you do so, emergencies will never lead you to the financial overburden. Moreover, you will pass a healthy financial habit to your child as well. As they try to follow the footprints of their parents, they will definitely implement this in their financial habits.
Bad Financial Habits to Avoid
- Overspending and Living Without a Budget
Parents who do not discuss the household budget with their children and those who don’t even make a budget mostly have spoiled children. Children want every new thing they see it starts with toys and gradually goes to gadgets. They demand things even which they don’t need. They are not at all aware about the importance of money and budget. Even they will implement the same in their life once they grow-up.
Money is finite for most of us and for a better financial future of your child spending decisions should be made based on family priorities. Even if you afford to purchase the things your child ask for, give them only if they need.
- Fighting Over Money Matters
Many people argue about money. But if you do this in front of your children, it is not good for their future. Never have money-related arguments in front of the children even try to avoid any kind of argument in front of them.
If they see such situation they become used to it and it becomes fine for them to argue with others regarding money or any other thing. They even start in childhood and will start arguing about their pocket money itself.
- Living Life King Size
Everyone loves their child and want to fulfill their dreams. But, this doesn’t mean that you should fulfill all their demands from childhood itself. If you start fulfilling their demands, they think you have so much money that you can buy and provide them with all the things which they want. This way their demands will keep on increasing with their age and at last, they will be the spoilt one. Moreover, it will affect their future adversely. So, don’t be a king and think twice before fulfilling your kid’s demands.
- Taking Debts
The parents who have multiple debts either due to poor money management or due to needs, things like paying the credit card bills in full, will not be able to balance their income and outflow, stick to a budget, or even save enough to reach their goals.
In case of a sudden demise of the parent, the children may even be left to lend for themselves. They are teaching the kids not to live within one’s means, and conveying that instant gratification is more important than saving for future emergencies.
Children are the clean canvas and learn from everything they see around them in their everyday lives. They don’t need to be brought up in an upscale society to have elevated money management skills, all that they need is the right example in front of them.