The summer vacation is a good time to teach children many things, including money.
“In today’s virtual world of television and mobile entertainment, it is necessary that kids are trained for the real world, which includes handling and knowing about money
management,” says Jignesh Shah, Founder, Capital Advisors.
You do not grow rich overnight
: Accumulating wealth is a long process, and hence, one has to teach children that the empowerment of having money
does not come overnight. You can do it by having a plan to explain this aspect to your child. If your kids, for example, ask to purchase something for them, give them the money and ask them to buy the thing on their own. Also, if they ask for something worth Rs 100, give Rs 10 every day for the next 10 days. Before they use the money, explain how being patient worked in creating the corpus. The technique works in two ways – it will teach the child to be patient and also the value of money.
Money comes at a cost: A child should understand that earning money is essential, but he needs to work for accumulating wealth. “Parents should encourage kids to work for a few hours a day and let them make their own money. Parents can provide guidance,” says Shah. Gradually the child will learn to value money, not because it has the power to buy a few things, but because it takes efforts to earn it.
Difference between ‘needs’ and ‘wants’: Children should be taught to make the right spending decisions. It is crucial to explain the difference between having what they need and just wanting to have something, which might not be required. A way to do this would be to make the child pay for a few things that he or she wants through their piggy bank. The depleting money in their kitty would make them wary of spending on things that they might not need or want to buy out of peer pressure.
Move from piggy bank to real bank: Get your child to move from piggy bank to some real-world money handling with outsiders involved. You may choose to open a bank account in your kid’s name. Take him to the bank branch and make him familiar with how it works. You may make him fill up a deposit slip and deposit some money in the bank. That would bring in the sense of ownership. “Opening a bank account in your child’s name is a good way to educate them on real money matters. They should learn how to deposit money, use a cheque or an ATM card,” says Amar Pandit, Founder of Happyness Factory.
Making your money earn is one of the lasting lessons you can teach your child. Instead of teaching complex investment lessons, you should explain the concept of interest and how it makes money grow. It can be done through fun ways. If he or she does not spend the entire pocket money, for example, you can add a few rupees to the piggy bank. And importantly, explain to the child why you want to give a reward for keeping money in savings and that this is how interest is earned.