7 ways of building good money habits in children

An integral part of growing up is learning good financial habits. Knowing good money habits sets the foundation for learning to manage finances later in life with prudence and self-confidence. Teaching financial literacy is simple, but it takes active effort. Parents can rest assured that this investment will only bring them and their children solid returns.

Here are some ways in which parents can incorporate good money habits in their children:

Talk openly about money: Many parents consider discussing finances and money issues or even troubles a taboo. Avoiding the subject altogether could result in your children lacking the self-assurance needed to earn, preserve, and invest their money as adults. You can impart priceless knowledge and skills to your kids using your experiences, financial mistakes, and accomplishments.

Give an allowance: Now, parents can give their kids a monthly allowance for recreational purposes so that they can buy things outside the household budget. This allows them to utilise this money in whichever way they want. Another way is to include kids in the household chores and give them monetary incentives per task. Doing so also makes them feel included as equal household members and can inculcate a sense of duty and responsibility.

Encourage saving and budgeting: For pre-school level children, this can begin with saving pennies in a piggy bank. Parents can open a bank account online in their name as children get older and show them how their allowance is deposited. Some kids' bank accounts even issue debit and ATM cards, so teaching them how to use those to buy things with their savings is helpful.

Talk about the difference between needs and wants: This is a crucial conversation to teach children the importance of buying things they require and things they do not need. It is not an easy conversation to have, but if done patiently, it will instil in them a value of money in children. The importance of budgeting comes here – if the child is pining for a new toy or gadget, the parent can help devise a budget to make the purchase. Teach them how to set a saving goal for a month, and how to segregate their allowance. For instance, parents can teach children the 50/20/30 rule. Here 50% of the allowance goes on needs, 30% of wants, and the rest into savings.

Allow them to make mistakes: Penalising your child if they have gone over their monthly budget or spent all their allowance is not ideal. Rescinding allowance as a punishment is not ideal either. Learning is a fluid process, and there is always room for mistakes.

Talk about investing: Introducing investing to teenagers is an excellent start for their future. Parents can, for instance, open a fixed deposit in their child's name and allow them to follow its progress to demonstrate how their money increases. Include the child in the investment process so they can learn about the several ways they can learn to grow their money as adults.

Set a good example: Practicing what you preach is the only way to impart proper knowledge. Children can pick up both good and bad habits by model. A child may not even take the parent seriously if they spend without thought while strictly controlling the spending on their child or deny them even minor indulgences. If the parent is proactive and transparent about managing their finances, it will only set a good precedent. Even if they are little, a child will undoubtedly notice these behaviours.

Start today by opening an HDFC Bank Super Kids Savings Account, and help your children navigate the future intelligently, by helping them budget, save and spend within their means.

Click here to open super kids saving account

​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.