Sanjana was bursting with excitement.
“Hey, I’m going to buy a gardening kit and grow my own roof garden. I’m going to sell the vegetables I grow and earn my own money!” the teenager said.
“What? You’ll own your own garden and earn money from it?” asked her friend Prithika in amazement. “How will you be able to do that?”
“Well, you see, I saved all my pocket money as well as the money I received as gifts for the past one year. I wanted to use it to get something special like a roof garden. But when I made enquiries, I found I needed some more money. So, I asked my father for a small loan, which I know I can repay in a few months. With his help, I have ordered all the material that I need,” explained Sanjana.
How did Sanjana come up with this plan? Is the concept of money and using it to buy goods part of our inherent knowledge? Actually, it is not! The traditional commercial knowledge of humankind is about barter - where gathering communities exchanged goods for goods. The concept of money came in much later, when certain items that could not be exchanged for others were produced, or goods were produced in excess of demand in conventional exchange patterns. These goods found a market in other communities which did not have an item to give in exchange, so another medium of commerce was needed – and money came into being.
When children are first exposed to money and its uses, they can be compared to the early explorers – they become filled with wonder at the new possibilities that open up. When a child sees money transactions taking place constantly all around him, he becomes curious and asks questions. Knowledgeable answers given in clear, understandable terms hold the key to the child developing a knack for managing money and using it for progress. In this, parents play a crucial role.
The concept of money and its role in economy can be explained in simple terms, using examples from daily life.
The family’s approach to finance and saving will govern whether or not the subject is introduced to a child early in life.
Money will not make any sense to a very young child. But children over six begin to see the connection between money and goods. So, that is a good time to start telling them the price of various articles. They can also be sent to neighbourhood shops to make small purchases and bring back the correct change.
First look at budgeting and saving
Children need to see how families budget, save and purchase the things they want. They need to understand how trimming extra expenses can help save towards addressing a greater need.
A child of nine or ten, who has been exposed to practical mathematics in school, can be taught the basics of budgeting for family expenses. If she wants some new gadget or toy, she should be given the responsibility of finding out its price, and then, ways and means of finding the money for the purchase within the family budget can be discussed with her.
The age to start a piggy bank for a child is when he becomes aware of money being given. At first, it needs to be only a small box which can be kept out of sight. When he gets to the age of nine or ten, the piggy bank can become a topic of weekly family conversations.
At this age, the piggy bank can be handed over to him, with an account of what has been accumulated thus far. Once the amount crosses Rs 1,000, it will be good to take the child to a bank and open an account in his name (as a minor account).
Pre-teens will benefit from being taken to a bank and introduced to the concept of saving. Children should be encouraged to deposit money in their accounts, handling all the formalities themselves.
Benefits of saving
A child who learns to save demonstrates responsibility and care in spending money. He also gains awareness about various aspects of products and marketability.
Children who save gain insight into:
- Money value vs material value
- Value of money vs value of effort
- Prioritising needs
- Quality of work
- Skill vs interest
- Self-sufficiency and purposeful spending
Letting go of the purse strings
Children’s spending choices should largely be guided by families, to ensure that they buy things that foster their creativity and development while letting them have fun. Discussions on what the child wants and whether it is appropriate are valuable for the development of the child. (Parental education on this topic is a must, to ensure that children are not driven towards a consumerist attitude).
The time to start letting the child spend would be when he has learnt to make decisions and choices. Children can be given the freedom to choose what to buy for themselves when they show an interest in caring for themselves, their belongings and surroundings. The child can be asked to wait until the required amount is collected in the piggy bank to purchase something he has been wanting, and the parents approve of.
Of Money – given and earned
Children should never be given money as a reward for good behaviour. Nor should chores around the house be paid for. These should be seen as collective family responsibility, not as services that need to be bought.
Ideally, a child may be given pocket money when she enters the teens, and has demonstrated a sense of responsibility.
When they are around 14 years of age, children can be encouraged to start some small revenue-earning activities – getting together with friends to organise a garage sale of things they have outgrown, for example, or growing garden produce (like Sanjana) or making eatables which they can sell. This will give them an understanding of the value of goods – used and new – in relation to the effort needed to earn money.
The bottom line: As parents, it is your responsibility to teach your child to save and to spend wisely. Go about it in a systematic, age-appropriate manner, and you will succeed in nurturing a financially responsible citizen. So, go ahead and let your child ride piggy back on kiddy bank!
Vidya Shankar is the Chairperson of Relief Foundation