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25 Nov
  • Editorial Team
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As parents, we are acutely aware of the fact that the world looks at our children as a reflection of us. The values they learn and the behaviour they showcase is attributed more to the parents than their school teachers, relatives and friends.

While we teach them everything from honesty to helping around the house, it is important to teach them about money and managing it an age-appropriate manner too.

Here are the key concepts of personal finance, along with suggested age of introduction, to help your kids become better informed.

  1. Savings - Age 4+
    Savings is a great concept to introduce money management to children. You can start by buying a small piggy bank and help them start saving money they receive from relatives. Many parents also introduce the concept of monetary rewards against certain tasks around the house (which are more than their regular chores). Learning to save money and eventually using it to buy a toy / candy of their choice will introduce them to the power it holds.

  2. Budget - Age 6+
    The concept of spending a part of their savings on something they want will ease kids into the concept of budgeting. You can share your weekly grocery budget before you take them shopping and then let them help you pick and choose, based on what fits your budget.

  3. Charity - Age 6+
    Around the time that you introduce the budgeting concept, the world can also be made a better place with small actions and introducing a "Charity" box. While you can subtly suggest how they can fill the box, let them decide how to actually fill it. Have a charity jar of your own to lead the way. During a special occasion, you can show them how the money from the charity box will actually help bring a smile on someone's face.

  4. Investments - Age 7+
    Most people end up confusing savings and investment. Show your children how a part of their savings can be invested to help the money grow. Teach them why it is important to have both savings and investments. An investment can begin with a bank account in their name, and you can help them calculate the interest amount to show how investments work.

  5. Pocket money - 10+
    Around the time your child recognizes his power as an individual and a way to express it, you can introduce him to the concept of pocket money. He can either save or spend it and take the first step in managing his own money. As a caution, start with a small amount and keep casual tabs on how your child plans to spend their money.

  6. ATM - Age 10+
    Performing simple transactions at the ATM can be a great exercise for the kids to know how the card and the machine work, and how to use them in general. Some banks provide cards for children and your child can have fun at the ATM with their own card.

  7. Interest - Age 10+
    Once they see the good thing about investments and how interest accumulates, you can also show them the other facet of interest - how you'll have to pay it when you take a loan. For example, he may run out of pocket money one month, but can take a loan from his sister with a payable interest rate.

  8. Credit cards - Age 10+
    Children may see you simply swipe plastic and take away a lot of groceries from the store. But it is important to get them to connect the swipe to the actual bill to be paid. Credit card debt is one of the worst things to have as the interest rates are strangulating. Talk to them about how you missed a payment and what penalty you had to pay.

  9. Debit card - Age 10+

    Around the same time, introduce the concept of a debit card too. Have a healthy discussion on the merits and demerits of each. Encourage them to tell you what's better and you will know their thought process and how they will end up actually using these cards.

  10. Credit score - Age 12+
    As soon as you introduce credit cards, also tell children about credit agencies and how they work. These agencies can save records that go right to their first credit card bill payment, and how not paying on time can have long term implications on every future loan they take.

  11. Debt / Loan - Age 12+
    Debt is something we, as adults, have to grovel through. Whether it is a home loan or a personal one, we have to plan our lives around the big loan decisions we take. Speak to them about the loans you have taken and how you plan on repaying them. It'll give them a better perspective on everything from your lifestyle to spends.

  12. Taxes - Age 12+
    Taxes are generally never spoken about in a good light. But it is important to tell children why they are necessary. Taxes are payable to the government for any money you receive so that they can create better infrastructure. You can even start applying a tax on their pocket money and add it to the family savings jar, which can be used for household repairs.

  13. Stocks - Age 15+
    Investments, at times, can be high risk high return games. What's important to teach here is that there is no such thing as a free lunch. Stocks are a great betting option that has made millionaires out of people, but it has also equally played a role in ruining lives. Taking a wise bet and knowing how to do it can be a great learning path for them.

  14. Long term investments - Age 15+
    It is never too early to introduce the concept of long term savings to your children. As teenagers, when they start their first jobs or internships at odd jobs, they can save a portion of their money in long term investment plans that can give a proportional return in a few decades.

Take the smart decision as a parent and start introducing money terms to your children today!

Disclaimer - This blog article is intended for general information only, please exercise your own judgement before implementing any pointers mentioned.

Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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