Make money management fun activity for your child

Children learn best through imitation. They pick up life skills by copying others around them. On Children's Day, instead of spending money on gifts for your child, start them off on the path of saving and handling money. While financial education at an early age can come through structured programmes, a large part of the learning comes from the parents' attitude towards money, say experts.

Common mistakes parents make

Parents often keep children away from money matters and hide any financial problem they may be facing from children. While they do this in the belief that they are protecting their children, it may not have the desired behaviour.

"Many parents try to shelter their kids from financial realities. They believe that kids should focus on doing well at school and enjoying their childhood and money matters are best learnt in adulthood. But what many parents don't realise is that financial habits are formed much earlier in life. A University of Cambridge study shows that money habits in children start to form by age seven. The study shows that parents are the most influential teachers when it comes building good financial habits,'' says Binal Gandhi, CEO, The Learning Curve Academy.

Kids today are growing up in an environment of relative abundance as compared to what the previous generations grew up in. Money, and the things that money can buy, are easily available. Hence, the biggest fear that parents have is about their kids not understanding the value of money, says Kiran Telang, a certified financial planner

"Value can't be taught. Kids automatically pick up a lot from what they see in their homes and the behaviour of parents and peer group. If parents' behaviour with money is good, if they value their money, kids will emulate,'' she says.

Hence, parents need to keep a watch on their money behaviour. "If they spend with a free hand without any discipline or indulge in binge shopping without responsibly saving and investing; if there are fights due to money at home, all these will impact the thinking in the children,'' Telang adds.

How to teach children financial matters

Financial education should start at an early age and can be easily made part of daily life. You can start teaching in small ways by gifting a piggy bank to a young child. As the child grows older, when they start understanding that money can buy things, the piggy bank concept can be taken further by setting goals of saving for small treats. Later, when they start learning mathematics in school related to interest, etc, the teaching can further move from piggy bank to bank accounts, recurring deposits, mutual funds, etc.

"This way they can learn the practical aspects of what is being taught in school and how it impacts their life. In fact, now there are specific money lessons available in many schools across the country. These are schools that promote financial literacy through associations with National Centre for Financial Education and their National Financial Literacy Test (NFLAT) http://www.ncfeindia.org/nflat,'' Telang says.

While there is no one way, Gandhi broadly suggests different concepts that can be taught at different ages:

5-10 years of age

• Give them a little money to spend in the school canteen or the school stationary shop. Let them learn how to keep track of their expenses
   
• Once kids can do basic addition and subtraction, take them shopping and have them pay the cashier. This way they understand how to count money and get the balance amount
   
• Start explaining to them how much things cost, so they can start understanding the value of money. Give them a budget for spending before you take them shopping, that way they learn to spend within the means available to them
   
• Teach children the concept of saving by putting some of their birthday gift money aside in a piggy bank
   
• Do not buy them all the items on their birthday wishlist. Let them get only one or two things. Let them learn to make choices. Let them make decisions and learn from their mistakes.

10-15 years of age

• Open a bank account and teach them the concept of interest
   
• Make a small investment in an FD and teach them about the power of compounding
   
• Teach kids personal finance through games such as Monopoly, where if you invest in assets like property versus keep money in cash, you will eventually end up richer

16+years

• Involve your teenagers while making a big ticket purchase. Kids can learn all about product research and comparison shopping. Also, they can learn how to buy within a certain budget
   
• A structured programme helps explain the difference between savings and investing and introduces them to the equity markets through gamification
   
• Once kids are in college, give them a credit card with a small limit so that they can learn about the pros and cons of taking on debt

Role of technology

Today, parents can use technology in teaching their children money management. For instance, a digital money management tool can enable parents to give allowances or pocket money to their children using a few clicks on their mobile app, says Javed Tapia, founder, Slonkit, a money management app. "It enables them to track and receive updates on the child's spends. More importantly, it enables parents to give children the freedom to manage money by themselves while being virtually present with them throughout this journey,'' he explains.

Such money management tools enable parents to set budgets as per spend categories such as food, travel, shopping, etc. It also enables parents to set limits on the money spent per transaction or per day.

Children can learn to manage within a budget, accountability and ensure that they maximise allowances they receive by leveraging offers, deals and discounts that digital money management tools may offer.