Do you know that money habits such as budgeting and saving are largely formed by the age of seven? In fact, it is rather hard to reverse these habits later on in life. Words such as inflation, recession, exchange rate, currency appreciation and depreciation, good and bad debt, investing and diversification may sound complex but it is important to know what they mean. Here are five tips to help you build smart money habits early
Observe, ask and learn
Do you go grocery shopping with your parents? If so, compare the prices of various products. You will see that the price of some items may have increased from the last time you bought them. Find out why that happened? Or look it up on the Internet with an adult’s help. Talk to your parents or other grown-ups about the cost of going to the movies or eating out. This will teach you about the value of money, how it is spent and how to save it.
Plan and budget
Once you understand how money is spent, think about budgeting. First, track your income (allowances and gifts) and expenses (buying stationery or snacks). Learn to prioritise needs over wants and set aside money for emergencies. For example, before buying that new toy, stop and think if you really need it. Prepare a budget for your birthday party or an upcoming vacation.
Start small by saving money in a piggy bank. If your parents’ bank has the option of a children’s account, open one and start adding money to it regularly. Then you will learn about banking operations. Set a goal for savings and reward yourself once you achieve it.
Come up with ideas to help you earn money which you can plan and save. Here are some:
- Do chores around the house like cleaning, washing dishes, or taking out the trash. Ask your parents to set a price for each one.
- Offer to babysit for family friends, neighbors, or relatives.
- Offer dog-walking or pet-sitting services to people in your neighborhood.
- Set up a lemonade stand in your neighborhood and sell lemonade, cookies, or other snacks.
- If there are houses with gardens in the neighbourhood, offer to mow the lawn, weed the beds or even clean up the dry leaves.
- Artistic youngsters can make handmade items like bracelets, keychains, or painted rocks and sell them.
- If you’re good at a particular subject in school, offer tutoring services to your classmates or younger students.
The author is Head, Money Lessons by BrightCHAMPS.