Keep your kids fiscally fit
It is up to parents to see that their kids reach adulthood
BANK WATCH BY SAJJAD BAZAZ
ONE of my friends visiting from the US narrated an amusing story. His son, seven years of age, is asked by his school to save a fixed sum for a certain period on daily basis. Then he is made to do purchases of certain things out of the saved amount. The goods purchased are not for use of the child, but in another session the school makes the child to sell these goods during a function where different stalls are put up manned by the school children. At this stage the child is now selling the goods to those who visit his or her stall. Mostly parents of the child or even selected people attend the function and they buy the good from these children manning the stalls.
This is a story which narrates the techniques of the school in US to train the kids in money management – saving, spending and earning. Even as my friend narrated the story in a lighter vein, it set me thinking. Where do our kids learn about money? The obvious answer is, from their parents. I have seen some parents making it a point to ask their kids to make payments in cash, calculate the change they should receive and tally it with what the shopkeeper gives back. However, most of these parents don’t do it with the intention to make their kids to learn about money management. But by default, this practice improves the kids’ mental math and, as importantly, teaches them to handle money and appreciate, over time, the fluctuating prices of daily-use goods.
Here I am reminded of money box or coin box, which is an inseparable part of our childhood memories. It used to be a treasure for us, as our parents used to inculcate saving discipline in us. Opening or breaking this box when it was full or sometimes half full helped us realize the benefits of saving. Today these money boxes are still around us but other modern ways of saving money are also available in the financial market where banks have saving schemes which can be used to inculcate saving habit among kids. Some banks have even exclusive products for kids.
Since the habit of saving forms the backbone of the wealth creation, then why not expose our children to financial products where they can save and lay the foundation of wealth creation for themselves. The first step to start saving for your new born should be to open a savings bank account or a recurring account, to park savings and cash gifts. Relatives and friends invariably bring gifts for the new born, including cash etc. It is best to make use of these gifts. The gift cash should be immediately parked in the account.
Parents have to keep in mind that their kids and expenses grow together. Admission to a crčche or a nursery class could cost them a good sum. Once their kid is ready to go to school, they will need a lumpsum for school admission fees. To meet this kind of expenditure, parents should put some money in a fixed deposit scheme and plan its maturity around the year when their kid is ready to have admission in the school. Even recurring account is suitable for such situations and in this account a fixed amount is to be deposited every month and one can start saving at the rate of Rs.50 per month.
Inculcating saving habit among kids is need of the hour. When your kid is mature enough, link his pocket money to a savings bank account. Now saving bank account will earn you 3.5 per cent on daily basis like a fixed deposit. So besides earning good interest on the money deposited in the savings bank account, it will also help your child to develop savings habit and make him understand how banking schemes work. This is the age of plastic money. Expose your child to debit card and make him understand about the working of a debit card. And don’t forget to explain him the concept of credit card. Parents should be cautious while exposing the kid to credit card. Since banking transactions are now purely technology driven, it is good to expose your kid to the latest technology and payment modes, such as mobile banking. And don’t forget to monitor the spending habits of your child. A predetermined spending limit would ensure that the child does not go overboard.
In today’s scenario, it is never too early for kids to learn how to handle money. Child's education is incomplete without a few lessons in how to take care of money. In order to teach your child the value of saving, you can't cave in to "I want that!" demands on the spot. Instead, offer a gentle reminder to the kid that the money is growing back home in his money b ox or in his bank account and soon he can buy things of his choice with his own money.
It is most important to teach your Children the value of money. It is up to parents to see that their kids reach adulthood prepared to face life's fiscal challenges. So the theory is - earlier is better. There are immediate and long term benefits of teaching kids about money early on. In the short term, they may develop strong saving habits, learn how to make smart purchases, and begin to understand the true meaning of investment. In the long term, they can be helped to avoid accumulating debt. And by teaching the value of saving for the future, the parents can help them plan for financial security.
An ideal time to begin teaching your children about the basics of money is when they first begin to notice it. Where Does Money Come From? This is a question which probes every kids mind. Parents should not hesitate to explain to their kids that money is earned by working, and that they can only spend what they earn.
It makes sense to introduce our kids to our ideas of money. It is not bad to give children a regular pocket money to manage. Encourage children to handle their pocket money the same way you handle household budgets. Guide them to in learning financial planning skills. In nutshell, parents should not forget to keep their kids fiscally fit.
(The views are of the author & not the institution he works for. Feedback at email@example.com)
Lastupdate on : Wed, 5 May 2010 21:30:00 Makkah time
Lastupdate on : Wed, 5 May 2010 18:30:00 GMT
Lastupdate on : Thu, 6 May 2010 00:00:00 IST
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