With money taking all forms and shapes such as plastic cards, mobile payments and online transfers, is your child finding it difficult to fathom the value of money? Have you often ended up cancelling an unwanted app purchase thanks to children handling smart phones and tablets early in life?
There are ways to avoid embarrassments and pointless expenses at stores and help your child value money.
Help them earn
A bulging piggy bank is always a reason for delight. But instead of filling it up regularly you can offer coins or money for tasks.
A Mumbai-based mother uses a star chart. "Every time she brushes her teeth or drinks milk she gets a star. Only after she has collected 5 or 10 stars, does she get Rs 5 for her piggy bank."
Children need to drive home the point that there are no free lunches. You can communicate this through various means.
If your workplace permits you can take children to your office on special days to help them understand what it takes to earn money and fulfill their needs.
Saving verses spending
Easy money never does any good to anyone. So next time you hand over pocket money you should ask them to split it into three boxes –saving, immediate spending, long-term goals.
"When a child gets pocket money, the focus is always on spending. Parents should move them away from spending and make them understand the concepts of investing and how money grows. Invest money in their name in various asset classes and illustrate how it grows," says Hemant Rustagi, CEO of Wiseinvest Advisors.
Engage them in budgeting
It is essential to make children understand that their needs and gifts aren't the only thing that money is spent on.
Involving children in budgeting makes them value money, says Rustagi. "They realise that parents are working so hard and about 30% of their money is diverted to school fees etc.," he suggests.
Using colourful pie charts to split expenses while accounting for monthly spends would be a good visual exercise.
Games and magazines
You can make lessons on money interesting by engaging games and magazine generated by various financial institutions. The Reserve Bank of India website too makes available comics (online and print version), puzzles and other games to teach concepts of money based on various age groups.
Traditional board games such as Monopoly, Business, Game of Life too can assist you in helping them understand the importance of saving and spending money.
Self-restraint
Children often learn by emulating elders as they idolise them. You can't be asking them not to buy unnecessary goods if you go on splurging.
At the supermarket, you can ask them to compare prices of one product against another. Inform them why you are opting for a larger pack and the savings thus pocketed.
Let them handle it
Though games and activities would teach them the concepts, but financial planners have started encouraging clients to engage children in financial planning. "We encourage investors to involve their children in planning and there is an increase in trend of parents who want their kids to learn financial discipline," says Rustagi.
Caution
Though Reserve Bank of India officially allows children above 10 years to own an account and issue cheques or even use cards, you should restrict the amount they can handle. Truncating card limits apart from keeping cheque books and passwords out of reach until they understand the concepts is quintessential. There have been instances where 14-year olds have blurted out passwords and fraudsters have made merry.
Also, open kids' bank accounts in banks where the minimum balance limit is either zero or low as that portion of money would lie idle.
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