Gurgaon-based financial planner Amit Kukreja often conducts workshops where he explains concepts such as active versus passive portfolio, earning from your investment, making a budget, allocating money and so on. Nothing surprising in this, except that some of these are conducted in schools for primary-class students. It is never too early to start teaching children the value of money and the importance of finance planning, says Kukreja, founder of WealthBeing Advisors. "Today, it is important to expose children to banking because we have moved towards non-currency-based monetary transaction and electronic currency." It could be for this very reason the Reserve Bank of India (RBI) has said children above 10 years can open and operate savings bank accounts independently. The central bank has left it to individual banks to fix limits in terms of age and amount up to which minors may be allowed to operate the deposit accounts independently and to decide what documents are required for opening such accounts. RBI also said a child of any age can open a savings, fixed or recurring bank deposit through his or her guardian. Although children today have access to much larger amounts of money than their parents did, a majority are not exposed to the concept of banking operations. Opening bank accounts in their names and encouraging of transactions under the supervision of parents is a good way of introducing them to such concepts. Shanti Ekambaram, president (consumer banking) at Kotak Mahindra Bank, says children must be taught the value of money and made to understand it is not unlimited, and that you have to pay for house rent, school fees, groceries, clothes and so on. "It is important for parents to inculcate the concept of a budget. Parents should tell children how much money comes from salary and how it is allocated for various needs," she says. Kotak Mahindra Bank has the Kotak Junior Account, available for children of all ages. The condition is that the parents should also open an account with the bank and also start a regular investment such as a recurring deposit (RD) or a systematic investment plan (SIP) linked to the Junior Account. With the permission of the parent, the bank issues a debit card with a limit of Rs 5,000 for children of 10 years and above. The bank has opened 25,000 junior accounts. "We try to capture children young, so that they learn the importance of financial planning by the time they are 13 or 14 years. By linking the RD or SIP to the Junior Account, parents can teach the concept of periodic investment,'' says Ekambaram. ING Vysya Bank has the ING Zing savings account for children in the age group of seven to 14 years. It comes with personalised debit cards, cheque book with access to internet, mobile and phone banking. It has an upper limit prescribed for ATM withdrawals and also for shopping at point of sales terminals. This allows parents to fix a spending limit for the child.
Parents can set the quantum of monthly cash withdrawal and spend limits. The bank has 75,000 Zing savings accounts. Sonalee Panda, head of marketing at ING Vysya Bank, says: "Once children open their own accounts, they become more concerned or excited when they see the balance in the account increasing or decreasing. Every month, they get the monthly statement, which introduces concepts about savings such as savings bank account, stock market and so on. It is more about financial education." A survey by ING Vysya Bank among parents showed half of them ask their children to earn pocket money by either doing chores in the house or scoring good marks in examinations. Panda says till the age of 14, children discuss all financial needs with their parents. Thereafter, children don't want parents to know what they do with their money, she adds. About RBI's move to allow children to operate accounts on their own, Ekambaram says guardians will continue to be involved in all decisions related to money. "I don't see parents allowing children to write a cheque on their own," she says. After opening bank accounts for children, parents should encourage them to deposit the cash they get as gifts or earned by helping in household chores. Then, when they get the monthly statement, they will be able to see how the interest gets added and how the money increases. "This is one way of teaching them how money kept in a piggy bank does not increase but money in a bank deposit will increase. Once the money is deposited in the bank, children might postpone purchases because they will now have to go to an ATM to withdraw money. This will teach them the concept of delayed gratification," says Kukreja. By going to the ATM and withdrawing money, children will be able to learn how to check the balance via ATM slip and so on. And, since they understand addition and subtraction by the age of 10, they can understand how money is debited and credited in the account. To teach budgeting, parents should start by giving children money and a list of things to buy from the shop and tell them to calculate and bring back the correct balance. This will introduce the concept of purchases. Or they should be allowed to set a budget for their own birthday party, allocate money for things such as food and games, then withdraw the amount from their own accounts and purchase the required materials. Today, many families involve children while making purchases, especially of white goods and luxury goods. Panda says this is good because it helps children understand the value of money. FEATURES OF CHILDREN'S DEPOSITS: * Linked to parents' account in the same bank * Linked to a regular investment, such as recurring deposit or systematic investment plan for mutual funds * Facilities include ATM, debit card and cheque book but with age limit for children to operate these * Limits on withdrawals set by the bank or parents