In an interview a few years back, Warren Buffett, one of the worlds’ richest business magnate, was asked what he thought was the biggest mistake parents make when teaching kids about money. “I think parents needs to start teaching kids about the importance of managing money at an early age. Sometimes parents wait until their kids are in their teens before they start talking about managing money when they could be starting when their kids are in preschool,” he said.
More than saving money for your child’s future yourself, it is important to inculcate the habit of saving among children and teaching them to manage their money. Children are fast learners and are likely to develop the practice of saving by the time they come of age. Teaching your child to save may become the first step to their financial freedom.
Learn to manage money – As Buffett says, you can start teaching children money management when they are in preschool. To start with, teach your child the importance of money.
Pocket pinch - Nowadays, almost all school going kids get allowances from their parents. You can teach your child to save a part of their pocket money every month. To encourage them, you can double to sum that they have saved every month.
Lead by example – Your kids will imitate you, so you should use this opportunity for the good. Being frugal and saving with your child is one way of teaching children the right path.
Open a savings bank account – Most of the nationalised and private banks in India allow parents to jointly open a minor bank account for their child aged between 7 and 18 years. For example, the State Bank of India has two products for kids called the Pehli Udaan and Pehla Kadam. While Pehla Kadam has to be jointly opened with the parent, Pehli Udaan can be opened in the sole name of the minor. Similarly, HDFC Bank Kids Advantage Account provides free education insurance of Rs 1 lakh in the event of the death of the parent. ICICI Bank has Young Stars And Smart Star Savings Account, Kotak Bank has Junior account and Karur Vyasa has Jumbo Kids Savings Account.
These accounts not just help your kids learn to save money, but also spread your financial burden over a period of time.
Every parent hopes to provide good education to their child, but the primary education begins at home. “Teaching kids sound financial habits at an early age gives all kids the opportunity to be successful when they are an adult,” says Warren Buffett.