Children are the future of the country. They will determine the direction the country takes, going forward. As they say, you never forget things that you learnt during your childhood. Our parents teach us goods manners, etiquette, and they groom us by teaching us the ways of life. However, my question is how many of us were taught financial planning ever since we started knowing that there is a price to everything that we want in life. The answer is a mixed bag really. Some parents give lots of importance to financial planning and ingrain its importance in their children’s mind right from their childhood while some parents leave their children to learn on their own as they grow. Whether the attitude shown by the latter is better compared with the former is highly debatable. However, one must remember every strong tree was once a strong sapling.
Here are a simple few tips, which could help you groom your children to become sound financial planners for tomorrow:
Hey! I love that cute piggy bank
Children love their cute piggy bank. Do you remember the one that you had? I had a nice pink one gifted to me by my dad, although I wanted something red. The point to note here is that we need to inculcate a culture of savings in our children and ‘piggy bank’ is a popular method for starters. We give our children pocket money, don’t we? Now, all we need to do is to make them put a small portion of that money in the piggy bank. We need to tell them that if they keep all their pocket money with them they may run out of place to store the money and may run the risk of losing it as well. Further, through a ‘piggy bank’, you can tell your children that there is a price tag on everything in life and that there’s nothing as free lunch. This will make them realise that they need to save money today for a safer and secure tomorrow.
Thus, getting them into a habit of saving money in a piggy bank will make them realise the significance of money saved today for taking care of contingencies tomorrow. As they say, we don’t forget lessons learnt during our schooldays, then why would we forget the savings lesson told to us by our parents.
Moreover, tell your child that they can spend the money saved in a piggy bank in an effective manner when they wish to buy something for themselves or even buy gifts for their parents on birthdays and anniversaries. They could get good storybooks, toy cars, Barbie dolls, and many more things that they want by saving money in the piggy bank. I find this a good way to motivate your child to save money.
Oh! That garage has a few worn out things that could make me my pocket money this summer
When your children grow a little older, you can teach them that old and worn out things also have value in terms of money. Dangle the carrot of earning pocket money for this summer and what better than a garage sale. Show the children how you can clear your garage by actually making some money. Drill into your children’s minds the all-important fact that to earn money, you will have put in hard work and effort. This could be the pedestal for preparing your children to face the hardships of life, as they grow older.
That gorgeous Hercules bike, the awesome GI Joe 3 toy, the list is just endless. Yes, tell your child that they can have all of those on their own without their parents’ help. Demonstrate through action how they can earn for getting what they want. Therefore, spend time with your children on a Sunday and get them to clear old furniture and other stuff from your garage. Once they get the money, make them keep one portion aside for savings and tell them why it is important to do so, and ask them how they plan to spend the rest.
This will go a long way in making your children understand the following:
- There’s nothing called free lunch, you need to work hard to earn your money
- You need to save part of your income for savings and plan your expenses
- All things have value in terms of money and could be useful
Dad, my friend has a savings account with his father, when will I have one?
Now that you have taught your children the importance of savings, you need to let them know the importance of multiplying their savings. Get your children to open a savings bank account and ask the bank manager to explain to them how their money will multiply through compounded interest.
If saving money is important, you need to train your children to know that leaving money idle in bank account will be criminal waste of future interest. Money is most effective when it is invested properly in a savings account and other investment avenues.
Take this opportunity to start SIP in your child’s name along with a small insurance plan. This will enable you to teach your children at a very young age the importance of diversification of investment. When I was 9, my grandfather opened a small term insurance plan in my name, which would pay me Rs.25,000 after 5 years and involved a premium of Rs 3,500 per annum. He used to show me the premium cheque and tell me that I will be paying this to the insurer once a year. Further, when I received the complete amount on maturity, he showed me the cheque and told me it is my reward for investing money for 5 years. My happiness knew no bounds as I was in 10th standard by then and realised how important it is to save money. I could use that money to buy my grandfather a Parker pen and a Titan watch, for his birthday and saved the rest in my bank account. If I got to know at a very young age about various ways in which I could save portions of my pocket money, why wouldn’t your children understand the same. So, don’t wait, make your children start saving portions of their pocket money now and teach them the significance of diversified investment options.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.