How To Talk To Your Child About Money
Although you know how vital money is to lead a good life, you may not know how to explain its importance to your child. Here are a few tips to help you.
By Karthikeyan Jawahar
We have always been taught how to make more money – study well; take up this course; join this particular institution; train yourself in ‘xyz’; find a well-paying job; be seen with the ‘right’ people; learn etiquette; take up ‘this’ business; shift jobs after ‘x’ years etc. But has anyone ever taught us how to manage money? Don’t you think if someone had actually taught us how to manage money, we could have done so much better in life and not have gone through so much pain? The more important question is do we want our children to learn about money the ‘painful’ way after they grow up?
Thankfully, we can help our children learn about money the fun way starting from an early age, rather than letting them face money on their own when they are much older.
Many parents believe that talking about money with children is a taboo. This is not so. Children can understand money and our financial status several times better than we think they can. At this juncture, I wish to share my own personal experience with my daughter, Bhavani.
When she was 3 years old, she always wanted to buy a toy when we went out. This was at a time, when she already had 2 big cartons of toys, all at different stages of functioning. The problem became so acute that one day she wanted us to buy toys twice on the same day. Her bouquet of weapons included asking, pleading, crying, shouting and rolling on the floor. As a preschooler, she was very innovative and would never relent until a toy was bought - the value of the toy never mattered.
Today at age 9, Bhavani is a well-behaved shopper and even teaches her younger brother Avinash (now 4 years) on how to behave when going out. The turnaround happened because, in order to train her, we started behaving responsibly as parents. We realized that when we went shopping, we were highly impulsive. We bought anything that we found to our liking – ‘our toy’. So as a child, Bhavani saw to it that she got her toy too.
The change came about after we started listing things to buy before our shopping trips, or before any outing for that matter, and sticking to that list. Today we have progressed so much that my children want to know our plan of activities for the day, before we leave home. It is okay, even if I am just planning on ‘window shopping only’ today. It is also okay if I am going to buy a dress just for one member of the family. But, we go out with a plan and stick to that. While we have not built a castle out of the money that we have saved, we have also not piled up useless junk in our house. The major difference is that today our family outings are joyful and happy occasions instead of dreaded events. The children today scour shops, find what they want, and put it in their list when it is time for their shopping.
Give an allowance
Giving a monthly (or weekly) allowance to children is an excellent way to train children with their money. The allowance need not be big, but the key is to track the way the money is spent. In a few months, children learn to distinguish and differentiate what is important to them and therefore learn to limit their ’fancy needs’. The first time when Bhavani got her allowance, she spent it on her friends. This was 3 years ago. Last month she funded herself to a National Level Yoga Competition held at Bangalore – travel, food, stay (for 2 days) and the entry fee. We gave her some money to go shopping. She came back without spending it, and instead used it as seed money for her trip to a competition in Sri Lanka.
That said, when we give an allowance to our children, our expectation that they should only save it and not spend it, is not warranted. They should be allowed to experiment with small amounts of money and learn from it. This will prepare them for handling larger amounts of money in the future.
The small falls at an early age are not very painful; besides, we are around as parents, to help them. After all, we teach our children to ride a bicycle before we buy them a motor-cycle, don’t we?
Start a bank and demat account
Deposit the savings (from the piggy bank) of your children in a bank. Take your children along (on Saturdays or when both of you have a holiday) to deposit the money. It is prudent to link a demat trading account to the bank account. (A demat account allows you to keep in it shares and bonds in a non-physical form.) Once in a while buy stocks from good companies with this money. These shares are only for the child. From my personal experience, it is amazing to see, the way this fund grows.
Childrens’ Savings Accounts
ICICI Young Stars a/c
Eligibility: 1 day- 18 years
Minimum balance: Quarterly balance of ₹ 2500
Withdrawals: ₹ 5000 - ₹ 15,000 per day through the branch
ATM Card: 7 years and above. Pre defined upper limit for withdrawal
Internet Banking: Separate passwords for the child and the parent
Cheque Book: Personalised cheque book, controlled by the parent
Additional features: The cheques have the child’s name on it
HDFC Kids Advantage a/c
Eligibility: 0 days- 18 years
Minimum balance: ₹ 5000- average monthly balance
Withdrawals: A maximum of ₹ 1500 per day through debit card
ATM Card: 7-18 years. ₹ 2500 max per day
Internet Banking: Monthly statement through e-mail
Cheque Book: Free Personalised cheque book
Additional features: Free education insurance in case of death or accident of parent/guardian, special sweep out facility and free standing instructions to transfer amount from parent’s account to kid’s advantage account.
City Union Bank Junior India a/c
Eligibility: 1 day- 17 years
Minimum balance: ₹ 250 for cheque book account and ₹ 100 for non-cheque book account
Withdrawals: The children should have the permission of the parents to withdraw cash No stipulation on the amount withdrawn.
ATM Card: Limit up to ₹ 2000
Internet Banking: The account can only be viewed by the child operated by the parent.
Cheque Book: The cheque book would have the name of the child on it. If the guardian/parents insist, then their name is also printed on it. The sign on the cheque is that of the parent/guardian.
Additional features: The child can remit school fees from his account and transfer it to the school’s account. The child also has the privilege of choosing his nominee. A piggy bank is also given to the child on opening the account to encourage saving. Promotion activities are held in schools where the children are educated on banking.
IDBI Power Kids a/c
Eligibility: 10 years to 18 years
Minimum balance: ₹ 1500- average quarterly balance
Withdrawals: ₹ 2000/day through the debit card
ATM Card: Attractive debit card customised for the child
Internet Banking: Monthly statements through mail
Cheque Book: Personalized local cheque book
Additional features: Discounts and cash back offer from time to time. Educational programs held once in a while for the child. Not mandatory that the child’s parents or guardians need to have an account in the bank.
ING Vysya Zing Savings a/c
Eligibility: 1 day to 17 years
Minimum balance: ₹ 2500- Average quarterly balance
Withdrawals: No stipulated limit
ATM Card: Debit card with cartoon figures on it is given
Internet Banking: Free access to internet banking
Cheque Book: Cheque book is given with the child’s name on it but signed only by the parent/guardian.
Additional features: Discount on books, toys and other things at selected outlets. Monthly transfer of money from parent/ guardian’s account to the child’s account.
Karur Vysya Jumbo Kids Savings a/c
Eligibility: Upto 12 years
Minimum balance: ₹ 500
Withdrawals: Permitted only through ATM
ATM Card: Issue of VISA Debit card No charge on issue as well as no AMC
Internet Banking: Not permitted
Cheque Book: Not permitted. Withdrawal only through ATM card.
Citibank Junior a/c
Eligibility: 1 month - 18 years
Minimum balance: ₹ 5000 per month
Withdrawals: It is set by the guardian/parent
ATM Card: The debit card will be attractive with pictures on it. It will be issued within 4 working days of the submission of the ATM Indemnity form by the parent/guardian.
Internet Banking: NIL
Cheque Book: Cheque book in the name of the child, but operated by the parent.
Additional features: The debit card is accepted by 75,000 merchant establishments in India and at 6 million outlets worldwide.
Eligibility: Upto 18 years
Minimum balance: ₹ 100 per
Withdrawals: Parent has to come personally and withdraw the amount
ATM Card: NIL
Internet Banking: NIL
Cheque Book: NIL
The above are just some of the ways in which children could be introduced to the concept of money and finance. There is so much more that we can do for our children.
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