3. Encourage saving & open a Bank account
Saving is one of the earliest financial lessons to be taught. Get a piggy bank and make it a habit to give your child a 5-rupee coin every day to put in it. When the piggy bank is full, take out all the money. Open a separate bank account for your child with a passbook and chequebook. Deposit the amount saved in the piggy bank into their account. Take the child to the bank and let him enjoy the experience.
When you start the monthly allowance, encourage your child to save a portion of the same. As a financial discipline, ask your child to save the money he receives as birthday gifts etc. It will make savings more fun and motivated if you link it to they buying something big from the accumulated amount say a bicycle, a doll set, PSP, cricket kit etc.
4. Budgeting
Budgeting is another important lesson for the child to learn. The resources will always be less than our desires & wants. Therefore, it is important to learn to prioritize our needs/expenses. To begin with, let them make a budget of the allowance they get. Let him make a list of what he wants and then decide what all is possible within the allowance. Over time, he will learn to distinguish between his ‘wants’ and ‘needs’. Remember that you would be doing a great disservice to your child if you meet all their demands.
Together with saving habits, budgeting will help him to plan for his future purchases, which may not be possible in a single allowance. He will also start appreciating the fact that money resources are not infinite and need to be judiciously used. It will also cut down the impulse buying and wasteful expenditure.
5. Investing
As your child grows up you need to explain the concept of investing and risk. What is the purpose of investing? What are the broad categories of investment options? What kind of risk they carry? What study or research needs to be done before investing? A few simple articles on investing would be quite helpful. And you could contribute some amount to enable them to make a few actual investments. Also, caution them against various kinds of common frauds.
Saving is one of the earliest financial lessons to be taught. Get a piggy bank and make it a habit to give your child a 5-rupee coin every day to put in it. When the piggy bank is full, take out all the money. Open a separate bank account for your child with a passbook and chequebook. Deposit the amount saved in the piggy bank into their account. Take the child to the bank and let him enjoy the experience.
When you start the monthly allowance, encourage your child to save a portion of the same. As a financial discipline, ask your child to save the money he receives as birthday gifts etc. It will make savings more fun and motivated if you link it to they buying something big from the accumulated amount say a bicycle, a doll set, PSP, cricket kit etc.
4. Budgeting
Budgeting is another important lesson for the child to learn. The resources will always be less than our desires & wants. Therefore, it is important to learn to prioritize our needs/expenses. To begin with, let them make a budget of the allowance they get. Let him make a list of what he wants and then decide what all is possible within the allowance. Over time, he will learn to distinguish between his ‘wants’ and ‘needs’. Remember that you would be doing a great disservice to your child if you meet all their demands.
Together with saving habits, budgeting will help him to plan for his future purchases, which may not be possible in a single allowance. He will also start appreciating the fact that money resources are not infinite and need to be judiciously used. It will also cut down the impulse buying and wasteful expenditure.
5. Investing
As your child grows up you need to explain the concept of investing and risk. What is the purpose of investing? What are the broad categories of investment options? What kind of risk they carry? What study or research needs to be done before investing? A few simple articles on investing would be quite helpful. And you could contribute some amount to enable them to make a few actual investments. Also, caution them against various kinds of common frauds.