Children’s Day: ‘Money doesn’t grow on trees’ is a saying that each one of us has heard at least once in our lives. But what if money could ‘grow’ and in a way that it can take care of all our needs even post-retirement?

With rising inflation, increasing lifestyle aspirations, as well as life spans, it is important to not just save money but do more with it, that is, invest it to beat inflation. Like adults, children too need to understand these concepts of personal finance management so that they are well-equipped when they have an income of their own.

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But how exactly does one teach a child to do that? Children’s Day is a good occasion to plan.

It’s important to remember that, ‘Monkey see monkey do’ is the approach that children follow, so they usually pick up and replicate what they see their parents do from a very young age. Fiscal life skills is sadly not a subject taught in school, and consequently, the onus of what children learn and replicate throughout their adult lives lies squarely on the parents. Here are 10 ways for you to get started with teaching ‘money skills’ to your child this Children’s Day:

1. Give your child a certain ‘fixed’ amount of pocket money every month to develop the idea of having their own money and thus, responsibility. Encourage them to not spend it all.

2. It’s a good idea to give a portion of it unconditionally for them to use as per discretion. But a certain portion should be incentivised and given only based on good behaviour or on the basis of some key tasks completed.

3. Teach your children to be careful with handling money too. Money must always be accounted for. It should be counted, kept in a safe place and the child should be encouraged to put down all expenses in writing.

4. Open a bank account for the child and encourage them to deposit a certain amount regularly (ideally every month), no matter how small. Any bonus amounts such as what they get from relatives or get from parents on special occasions should be put in that account.

5. Encourage them to take up small jobs in their holidays which they can be paid for. This will help them learn how to make money in their spare time.

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6. As a weekend activity, share newspaper articles from magazines or the internet about savings and investments and have discussions around it. Discuss investment instruments such as mutual funds and the importance of having health insurance. Explain it in simple terms with examples and help them feel comfortable about these terms. This will make them understand the fundamentals of having good financial health.

7. As children get older (12+), ask for their suggestions or feedback about some important family decisions such as buying a new home or a new car, or a big holiday plan. Discuss it in terms of its fiscal fundamentals and how that works – in terms of down payments, EMIs etc. Get them to see its different elements and how you make each rupee go that extra mile. Give them an opportunity to come up with solutions as well. They may come up with interesting observations that will surprise you.

8. Encourage children to start a SIP from their own bank account which you would have to manage as the guardian. This is the time to give them investment targets and interest-based goals.

9. When children are 15 or 16 years old, they could be allowed to use their debit cards under adult supervision. This will give them the freedom of using their own money for their ‘wants.’ If by now, they’ve been managing their money for a few years, you should hopefully already see some element of fiscal prudence.

10. It’s a good idea to set goals with children from an early age. They should learn the power of having fixed financial goals and saving up for them incrementally. Encourage them to develop small goals for themselves, like saving up to buy that X-box or a holiday with friends.

Finally, it’s important to remember to take out time along with your spouse to have conversations about productive ways of making money and growing the corpus, as opposed to conversations about the lack of it and worries around it. Children absorb subliminal messages and are more likely to follow what you do than what you say. Finally, empower your child with the right values, both about life and money.

(The author is CEO and Co-Founder of Scripbox, an online investment platform.)

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