Piggy banks are for new-borns. And in this jet age, all kids know that money certainly doesn’t grow on trees. On your part, you may have invested in the right options and charted out your short or long-term investment plan, but the benefits that you may reap from making your kids financially aware cannot be quantified in monetary terms.
In fact, in this era of pay cheques, it becomes even more important to make your kids understand the concept of fiscal accountability. After all, it’s you who has to take the ultimate responsibility? That said, making your kids aware about dollar and dimes (in our case rupees and paise) is no miracle.
SundayET spoke to captains of different industries to find out how they have planned to secure the financial future of their kids. Besides encouraging habits such as sharing, understanding the value of money and even charity for the overall development of the child, they highlight a step-by-step journey on how to introduce your child into the financial world....
Although he hates to call Jetlite a budget airline, the habit of budgeting is what Jetlite CEO Gary Kingshott emphasised to his kids. “Budgeting is the first step of sound investment planning. You should know the resources that are available and accordingly you should allocate and spend them,” he says. According to Kingshott, from the very beginning, he inculcated this practice in his kids.
“I did two things. I set up a limit of $100 a month. And I gave them an option that either they can take the whole yearly amount or ask for it per week. In this amount, they had to manage their expenses such as buying presents for their friends, partying or others. This not only gave them a real-life experience about money, buying and selling but also taught them to make their own decisions whether to spend or save or on different things,” he muses.
Kingshott believes that this also generates interest in children and makes them responsible. “But you’ve to play smart. Set the terms of the allowance and make it clear to your children at the outset, otherwise they’ll always find an excuse to ask for some more amount,” he cautions. Today, he feels that the habit of budgeting has helped his children not only to manage their finances but also in their personal lives.
Open an account
Vikas Vasal, director, KPMG India, advises firms on issues which can turn around their fortunes. As a director of one of the world’s leading advisory firm, it’s not easy to miss on the numbers. “Numbers are important for your kids too,” he says. He has two children — seven year-old Chahat and five-year-old Muskan.
“Recently, I opened a bank account for my eldest one. I made her go through the terms and conditions just to make sure that she understands the purpose of opening a bank account. She did make some childish inquiries but that was the purpose of her going through the content. I also made her fill the form and wherever she was at sea, I bailed her out by explaining the financial literature in simple and easy manner,” he says.
Vasal feels that since the child’s account is linked to the parents, you can make sure that your kid deposits a part of his/ her monthly allowance in the bank. “ Later on, you can gradually introduce your child to the entire range of banking services, such as ATM cards, net banking, debit cards and even statements,” he adds. For young adults, Vasal suggests that the parents can set a spending limit for the card and keep a track of the money that the child spends every month.
Mutual fund SIP
An expert on financial matters, Reliance Money CEO Sudip Bandyopadhyay feels that when it comes to teaching your kid the nuances of growing money, there’s no difference between an adult and a child. “To inculcate investment habits in my children, I have introduced them to mutual funds through systematic investment plan (SIP). With micro SIPs available in the market, you can get your child started with an investment of as low as Rs 50 per month,” he says.
According to him, the charm of managing money is exciting for youngsters and seeing the money grow only adds to the confidence of the child. “Your children would be on their feet, literally. Once you get them going, they would start inquiring about any financial product they are exposed to, with you,” asserts Bandyopadhyay.
He believes that making your child invest in SIPs involves a two-pronged approach. “Not only they’ll use their allowances for making investments but it will also help in future if they wish to pursue higher studies,” he adds. Bandyopadhyay feels that you should involve your child as much possible as in the decision-making process.
“For instance, whenever we are planning for holidays, I take suggestions from my children on how can we efficiently budget our travel plan. At the end of the day, your children should realise that they are growing up and are part of the think-tank of their family,” he reasons.
Insurance is subject matter of solicitation. And the same stands true if you really want your kids to be financially aware, believes Nitin Chopra, CEO, Bharti-AXA Life Insurance. “You’ve to generate a curiosity among your children so that they ask for details.
Most parents forget that any young adult would love to take on responsibilities, provided you give him space. In my case, from the very start, I made sure that my daughter, Vidita, was aware of my financial transactions. And in this Internet age, I made sure that she learnt almost everything about banking on the Net. Today, she advises me when it comes to handling accounts,” he laughs.
Chopra feels that today parents don’t have enough time for their kids. But taking out some time and imparting the right lessons can help in shaping their future in a much better way. “I went along with my daughter to the US at the time of her college admissions but she needed little help from me.
She was confident and filed all the papers, including opening an account, all by herself,” he remembers. According to Chopra, ‘e-banking’ is the future and if kids have a basic understanding, it will help them in the long run. “Today, you can do anything and everything on the net and if you are comfortable with it nothing is better,” he adds.
He may be dictating terms to his subordinates on how to bargain in the wholesale market while sourcing fruits and vegetables for Food Bazaar outlets, but when it comes to educating his kids, Pantaloon Retail Food Business CEO Arvind Chaudhary believes that playing money games is the best way to teach the secrets of a good deal.
Now be it the game of monopoly or learning the bulls and bears of the stock market over the Internet, “I encourage them to play lot of money games. They really help sharpen their mind and bargaining skills,” says Chaudhary. The Chaudhary family, in fact, assesses every family member on the last weekend of a month on how efficiently he/ she bargained for goods. “Negotiating ability should be inculcated in a child right from the beginning. It gives them a broad picture about the importance of money,” he feels.
Chaudhary also tries to involves his children in daily financial matters. “If I am making some payments through cheque, I ask them to cross-check whether I have filled up all the relevant details. Similarly, I ask them to keep a track of the due date of an insurance premium,” he reveals. Chaudhary believes playing stock games over the Internet has made his children more aware of how actually the stock market operates and this will help them in future.