In a competitive environment, the fittest always survives. Normally we apply this logic anywhere we want to outplay each other. But in market science, it's financial not the physical strength which makes a person capable of competing successfully. When we talk of financial management in the context of our own state, we realize that we have ignored our financial convenience, Majority of us were either never really taught how to manage money, or maybe we simply avoid thinking about it because the situation was so dire. But we may have skipped money management aspects, today the dire need is to incorporate some simple money management skills among our kids and let them have a greater awareness of money to keep themselves fiscally fit.
Some time back, an acquaintance of mine visiting from the US narrated an interesting story about money management skills of his seven-year-old son. Basically, his son 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 story set me thinking. Where do our kids learn about money management – saving, spending and earning? 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 crèche or a nursery class could cost them a good sum. Once their kid is ready to go to school, they will need a lump-sum 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.
When your kid is mature enough, link his pocket money to a savings bank account. 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.
Precisely, it is never too early for kids to learn how to handle 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 box or in his bank account and soon he can buy things of his choice with his own money.
So teach your children the value of money. You can prepare them to face the fiscal challenges of life. The theory is – earlier is better. 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, you as a parent 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. In nutshell, parents should not forget to keep their kids fiscally fit.