How to teach good financial and investment habits from early childhood
The practice of saving is an integral part of everyone's life. In today's world, while children are quick to understand the capacity of money, it is difficult to teach them its value. We can make them understand the true value of money by teaching them good financial & investment habits from early childhood. Here are a few steps you can take to begin the process of embedding financial literacy in your children.
Start at a young age
Start introducing the concept of savings, to seven-year-olds. As many children receive money from their parents as a way to bless on special occasions. Find a small piggy bank and ask them to put that money in it. Give them the remaining coins from change to put in that piggy bank. After a few months you show them the growing number of notes & coins, this will make them happy.
Although children may not fully comprehend the value of money, they will understand that money grows when it is stored in a safe place. For children it is fun & exciting, to insert those coins till the piggy bank gets full.
Tell them about Spending, Saving & investing
When the children are older, say about 12 years old, Since 12-year-olds are already immersed in the concept of money, it is easy to define savings and invest in them. Ask them to put those in three separate boxes so that they will understand the importance of distribution for their small small needs. Explain to them the concept of allocating funds from different boxes for different purposes. They will put some to save for later, put some to buy bat or ball or badminton racket or some book, put some for investing. Yes investing. Nowadays it's possible to invest for minors. The parents can handle their account till they get 18 years old and invest with an understanding of their children. letting them use their saved money from pocket money and blessings to invest and grow.
Open a bank account for them
For this, I would recommend the government banks where we get a passport instead of ATM cards. This is for older children, more than 12. Take them to the bank and present to them the bank plan. Get them to renew their passbook so that they can understand the amount and interest they are paid. Although it may be a small amount of money, children will soon realize that the best way to save money is to put it in a bank.
Once the banking system is understood by children, you can gradually introduce them to other activities such as withdrawals, investments through the bank, etc.
A savings bank account and investment option will ensure that they think wisely about their expenses. It will also make them aware of the importance of money and how saving can help them achieve their long-term goals faster.
Towards goals setting and investment
Today, more and more children are experimenting with different career options, working while studying, etc. This is a great time to get them invested and focused on a long-term goal. Children in the 16+ group will have an idea of the type of education they wish to pursue. Discuss the goal and think about a good investment option.
Objectives may range from studying at a particular premier college to a graduation course or postgraduation course, learning some life skill or music, etc. While these savings may not cover all costs, if you donate your share, it will be fun for the kids as well. Investment instruments can be Mutual fund SIPs, the stock market, instruments like bank FDs. Depending on those goals determine the investment option.
After some years it is always good to include the children in family discussions about monthly expenses. Listening to these discussions will feel them responsible and it is a great learning experience.
These all small things will help them understand about investment & personal finance from childhood. These good financial management skills will be useful for them in the future.
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