Children and Finance

It is not a good idea to make a child focus only on money, but the lack of knowledge could lead to their exploitation. Just as today’s child is tomorrow’s future, money saved today is tomorrow’s capital and it needs to be channelized properly. Awareness of finance is very important for everyone and making children aware of financial concepts will help the child when they start earning money. They will hopefully not make the same mistakes you may have committed. Start with some essentials like how budgeting can help the child to live within his /her means and then asking for more pocket money could be reduced. Teach them of the problems associated with taking loans. Instead of just filling their pockets, give them a loan and deduct it from next months pocket money. Open a bank account and show them how by saving they can earn money i.e. interest.

Once they understand this teach them about various insurance options and how they help in case of some event happening. Now that the basics have been taken care of, teach them about basic investment options like fixed deposits, recurring deposits and post office savings schemes. Now that they have understood all the different types of schemes in which you had always invested and did not make enough money, introduce them to the world of mutual funds and the benefits of diversification of portfolio. Once they learnt how to make money, now teach them how to save money while investing. Teach them about charges and costs incurred while investing. The various types of charges for different types of investments and finally introduce them to the world of stock markets and how all other investments are linked to the stock market. Once you have done that, they will thank you all their life.

Financial independence cannot be met only by teaching a child to earn high income but by good money management.