“Children are like wet cement. Whatever falls on them makes an impression” ~ Dr. Haim Ginott
An early action to teach your kid about money and savings are a good idea to give better money management ideas when they grow. Using simple methods depends on there age, you can easily bring them getting good understanding on money and can grow a habit of savings. Below are some practical methods a parent can use to teach there kid about money and savings. Have a look:
Money lessons to kid
Age group 1 to 7 – Give her a piggy bank and let her collect and deposit coins to that box. Regularly give coins to your kid for her piggy bank. This approach build a habit of small savings in the early ages.
When the piggy bank is full, open a savings bank account in parents name and deposit the amount to that account. Small drops can form a sea in the future. Someone in my place starts this habit at the age of 2 and still he following at his present age of 43. The account his father opens for him still alive with enormous amount from his small deposits for long term and now he planned to teach this habit to his daughter and present this account to her.
Age group 7 to 10 – Give her awareness about savings bank account, how adding and removing money from savings accounts, how the money growing in it with interests etc… teaching her about interest calculations will do magic at this stage.
Take her to bank with you and let her learn how dealings are happening there. Give ideas to know more about bank transactions.
Age group 10 to 15 – Start a recurring deposit. Instruct to add a small fixed amount in each month. She can easily collect this amount from her pocket money and gifts. You can also give small amounts as gifts on there good work like well study, helping mother and father, cleaning house, gardening etc. Let her build very good awareness about systematic savings well as the hardworking nature to get awarded promptly.
Teach her on compound interest and the magic of compounding. It is very good in this age to know how compound interest works and how the amount increasing by its power.Give practical knowledge on banking services like using ATM, cheque book, internet banking facilities etc.
Age group 15 to 18 – Give directions to get knowledge on various investment instruments available in the market. Teach her about mutual funds and how it is working, fixed deposits etc. Let her get awareness about various investment products and the difference of returns from these products and different risk levels related to each products. Teach her the possible systematic and disciplined investment methods available with various instruments.
Starting mutual fund investments using SIP (Systematic Investment Plan) will be very helpful to teach disciplined investment style in this age.
From the age of 18 – Give well awareness about stocks and how stock market working, mutual funds and how mutual funds working, profit and loss possibilities with each of these instruments, risks related to such investments. It is important to teach the pros and cons of investment instruments that is directly related to stock market.
Let them start stock investing using there own D-mat account, which you can help to open in there own name. Give them idea about the preparations required to start stock investments by providing investment practices used by legend investors. You can present them the very best available biographies and books on the work of legend investors, to get her very good ideas on successful investing.Help to start her personal financial plan by providing the idea behind it and convincing its requirement for her life. Help her to plan and build her own financial plan by identifying various possible investment instruments by assessing risk taking capacity teach them the methods of selecting good investment instruments for long term.
If you plan properly from the beginning, I can assure that your kid will be a master financial planner at the age of 30. By doing such, you are not only leading her life through proper and bright channel but also, inspiring her to pour this knowledge to her kids.
Parents should take necessary precautions when teaching there kids about money and savings. Parents should identify and correct any over enthusiasm which may happen to there kids on money. If allow, this can lead them to be a money greed character. This should be avoided using proper guidance and timely corrections.
My best wishes to those already started teaching savings and investments to their kids and also best wishes to those who planned to start the same.
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