Lay a firm financial ground advice relevant to their age:-
The Indian Parent is a prized breed. Prompted by primal instinct and primed by tradition, this class presides over a rare predilection — it is consumed by concern for its progeny. Ensuring the kid’s financial security becomes the parent’s raison d’eetre; empowering him, Mission Possible. Towards this end, they initiate a saving spree that lasts till retirement and spans all of the child’s material needs.
But between drowning him in toys and gadgets, and deferring to his sundry desires, the parents foster an unlikely paradox — they protect the child from all monetary mechanisms, shrouding these in faux secrecy. There is no deliberate attempt at exposing the child to money truths, educating him about the diligence of earning it, the discerning to spend it, or the virtues and avenues of saving it. There is no cogent strategy to let him handle it, make mistakes and learn. So the child imbibes flawed perceptions about money, which evolve into misconceptions, and result in an adult who doesn’t know how to use his credit card or repay a loan.
The current milieu begs an immediate attention to this issue as rising disposable incomes have landed more money in kid’s hands. But most parents don’t know how to talk to them about money. This is where we step in. We take you through five stages of the child’s formative years and tell you the correct strategy to unravel the money manager in your kid.
5-6 YEARS: Make an early start:- Isn’t 5 years too early to talk about money? If you whined out that question with a drop-jaw expression, you are prone to being a late starter. The first lesson for the parent : begin early. “when a child starts playing with coins and not put them in his mouth, he’s ready to learn. You need to give him the feel of money, not teach him.” At this stage, simply introduce the concept of money to the child by exposing him to it. A critical requisite: Make it fun. Give him coins and ask him to sort them by size or thickness. Help him distinguish notes by their color. Devise your own games built around money, say shopping for a toy. “You don’t have to start the process officially. Make it a part of your life. Just go ahead, start talking to your kid.” The child learns more by observing your actions than if you were to give a daily lecture.
Remember never to force the child into any activity. At this age, the child’s attention span is very short, so don’t push him. If he sniffs a design on your part to teach him or the exercise slips into a classroom drone, he’ll switch off faster than you can spell m-o-n-e-y. In fact, completely expunge with tutoring as a strategy, be it at five or 18. This is the reason money management may not succeed as a part of school curriculum even though some experts advocate it. The kid is more likely to develop a distaste for learning if it’s belted out with assignments.
7-9 YEARS: Open a bank account:- Open a child banks account for your kid even though it has the same saving potential as a regular account. If you shared a “huh” moment, read on. Many parents open a joint savings account for the kid when he is born; a prudent thing to do. By all means, pour into it the monetary gifts he got as an infant and atter, his piggy bank collection. However, between the ages of 10 and 12, scout around for a good child-friendly bank account. Make sure that it allows your child to operate it and not just through the guardian. The experience of depositing or withdrawing money, signing his own cheque, and getting a personalized statement will not only educate him about bank transactions, but also expose him to concepts most adults flounder at. The banking experience can also be enjoyed virtually through initiatives such as that by ING Vysya Bank which runs an online portal, kidzzbank.com. It not only introduces the child to banking terms and concepts, but by simulating transactions, it stimulates his interest. Another idea that you need to implant at t his stage is diligence that goes into earning money. So lay out minor errands for your child and pay for his effort. “Doing small jobs around the house or something that requires intelligence, say, booking a cab, or surfing the Internet for information should be rewarded. It teaches a kid the value of money.” You should also encourage the setting of medium term goals, such as buying popular gizmos or shoes, from the child’s savings.
10-12 YEARS: Fix an allowance:- This is the right time to invest in two crucial things: a wallet and a piggy bank. Keep the wallet for pocket money, the piggy bank for random collection of money. This money can later be put in a bank account. Pocket Money? Does that go against your grain, game plan or gumption? Allowance is a vital tool that you can use to form sturdy, lifelong fiscal habits in your child. The way you guide him into using this cash could determine whether he turns out to be a decisive, responsible money manager. It’s the right age to start him on one because he has imbibed the concept of money and is now ready to experiment. He has begun to grow consumerist fangs and there are a zillion things he can sniff around in shops. So what do you do? Drag a bawling tyrant out of a mall brimming over with spectators? There’s a better option. Let him decide what he wants to buy with it. Fix the things that lie within the purview of this cash pile and the ones you will not buy for him, say sweets or small toys. Stick to the rule but explain the law of the land to him. If he uses the entire sum to buy one toy, he will not be able to pick anything for the rest of the week or month. An important step is to set short-term goals for him. If he saves enough money, he could buy the toy he has been coveting. A suggestion here, a comment there and the impressionable kid usually falls for the optimal combination of saving and spending. Let him make mistakes; they will make a better learning than structured advice. So, how much should you give? It’s a debatable issue and a call every family needs to take depending on the lifestyle, spending, and the attitude of the child.” So if your child is reckless and low on responsibility, start with a small amount. If he improves, increase it. If he doesn’t, wait for some more time. This is also the time you can introduce the kid to online money games such as familylearning.uk/money_games.html or board games like Monopoly.
13-15 YEARS: Budget and save:- The dreaded T-phase begins. Harbinger of emotional and physical turmoil with you at the vortex, the teen years are not an easy patch to surf past. The child’s monetary needs bloat into a black hole — movies, outings, mobile phone — make sure he realizes you are no cornucopia. So the strategy at this stage should be two-pronged: increase his allowance, and ask him to engage in budgeting. Let him prepare a ledger comparing his income with his outgo. It will infuse a reality check and he will try to compress his needs with his means. A tool that is being brandished by banks to lure this set is the debit card. Unless the child is studying in another city and needs it for specific purposes such as paying fees, it is not advisable to unleash this card at this stage. “It has its advantages — the child doesn’t need to carry cash, and the parents can easily track the spends.” But it is important for parents to train the child on how to use it, the significance of not sharing the PIN and keeping it safely. So, educate the child about the card’s usage but wait for a couple of years before he uses it. An important concept that needs to be reinforced is saving. “Kids of this age should save about 40% of their allowance.”
16-18 YEARS: Cram up more lessons:- Your child is now on the brink of adulthood, but there are many monetary miles to cover. One of the first is the discussion on education loans. If you can bear the financial burden, by all means cover your child’s educational expenses, but if you can’t, going for a loan is a good idea. Repayment of a loan not only inculcates fiscal discipline in the child but familiar him with the relevant bank transactions. It’s also time you talked to your kid about taxes and investing. He should know how he can grow his money by investing in the stock market or gold, in mutual funds and fixed deposits. Tell him how his salary or FDs will be taxed, how much insurance he would need later on. An important prerequisite is that your own knowledge about these subjects should be refined. So brush up your finances. You also need to stress the saving habit for long-term goals, such as buying a car. Don’t let the child tamper with his bank savings. In fact, urge him to supplement this stockpile by taking up part-time jobs during vacations. An important money skill you should impart is including the child in family budgeting. “Parents tend to keep kids out of financial decisions. It is not aimed at getting them worried, but to make them understand the process of inflow and outflow of funds.”
