It is important to communicate money matters to kids and get them interested in what’s happening around them concerning money-how to save, how to grow it, how to spend wisely and how to prioritise are some decisions they need to get involved in, necessarily.
You should make kids understand how to differentiate between needs, wants and wishes. This will prepare them to prioritise and will inculcate good spending habits at a young age, which they would carry way long into their adulthood. Since setting of particular goals is of fundamental importance, whatever age group a person belongs to, it becomes important for children to get going with the thought of saving and spending to achieve a particular goal.
You should also start giving them some allowance when they decide to save for their coloring book in their piggy bank instead of buying candy. That incentive will gently nudge them towards spending for something fruitful rather than spending for perverted fun.
Getting children a piggy bank, a children’s saving account or a card that is connected to your account is a great idea to give them a hang of how financial system works and why it is important to save and invest. It is good if you do not refuse them from spending a portion of their savings, otherwise they would not want to save at all.
Ask them to keep a record of household spending and saving, or else let them be by your side when you do it, just to give them a knack of how every rupee is earned and saved or spent. This can be nicely done through using color coding, of making 12 separate envelopes for each months expense list to be put inside. At the end of the year, it would help them draw comparisons and analyse the trends and differences, if any.
Use shopping trips and trips to banks as a superior opportunity to help them learn and understand how to pick and choose things to buy. Spending wisely and saving smartly is what they would learn through these experiences. Explain purchases to them before hand and demonstrate to them how to pick an economical meal, to find best suited but affordable furniture and how to avoid waste and use leftovers efficiently.
Show children TV, print and roadside ads and help them evaluate and understand pros and cons of buying and using those products. When you make monthly budgets, try asking them questions whether these products would fit in somewhere or not and listen to whet they say, so that you inculcate the right thinking into them.
One good starting point is to show them the "One Idiot" movie made by IDFC Foundation & directed by Amol Gupte (Taare Zameen Par fame). This is an excellent moving showing importance of saving to Kids. Please click here to see this short movie on YouTube.
When you discuss financial matters as a family, make sure to include children. These discussions could include choosing the product to buy the current month from among all those on the list or other saving and spending decisions.