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| Capitalstars Investment Advisor |
How you train your child as a kid will determine how he/she behaves as an adult. It is essential that you start inculcating in children the good money attitudes and habits right from the start. Follow these simple steps from his/her young age to make your child financially self-reliant.
Step 1: Start with budgeting
Start at a young age by giving them pocket money. Let them spend or save and use it at will, but explain the consequences and make sure you do not replenish it if it ends before the specified period.
Step 2: Manage expenses
In mid-teens, get them a debit card and let them manage their bank account and personal expenses like phone bills and eating out. If they run out of money, let them find a job to supplement it or cut their spending.
Step 3: Give them responsibilities
After 18, specify certain tasks that they will do without your help. They can maintain all the vehicles in the house (servicing, pollution checks), pay utility bills, or make travel bookings. You can pay for these, but they should execute the tasks.
Step 4: Let them save for their goals
Let them pay for their higher education and wedding. If you have taken an education loan, make sure they repay it, not you. Let them buy their own car or phone as and when they can afford it. So, advice them to start saving for their goals as soon as they get a job.
Step 5: Set an insurance deadline
Specify the age till which you will cover them with your insurance policies. After this, let them buy their own insurance policies, be it to cover their vehicle, health or life. You can guide them, but let them assess their own requirements and pay the premium.
Step 6: Don’t invest or buy property for them
Once they get a job, let them invest on their own. Do not do it on their behalf. While buying a house, do not take a joint loan or buy it for them. Let them conduct all the formalities and carry out the actual process of buying on their own. Do not entangle your finances with theirs.
Step 7: Don’t try to run their house
If the child has moved to a different city, do not set up the house for them or make regular purchases for them. Let them run the house on their own before they get married. If they stay with you, let them share financial responsibility by paying rent or maintenance, or taking care of certain specific expenses.