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Bring your child closer to the world of banking

By opening a bank account early and financially rewarding them for achievements, you can teach them the value of money

Steven Fernandes 

Six-year old Ashish Sinha is a marketer’s delight. He ensures that his parents – Ashutosh and Smita Sinha – are constantly visiting malls and shops to comply with his latest fancies. The doting parents also entertain him, as they feel he should have the best. Of course, Ashish does know how to influence their decision making – a little tantrum, a few shrieks and tears does the trick.

In fact, his parents end up having constant fights because if one wishes to be tough, the other ends does not agree. But since the couple is not able to spend enough time with Ashish, they spend lavishly in buying him toys, gifts, etc.

Despite this, there is no end to the boy's demands. So, even though there is a realisation that things are beginning to go out of hand, they are hoping for the best.

Some start by opening a bank account with the very gifts that they receive from family and friends on his birth. And slowly, the child is taught to understand the numbers. Even banks such as HDFC Bank and ICICI Bank have started bank accounts specially meant for children. The minimum limit to be maintained in these accounts is lower than ones for elders. The limit on spends are lower as well. For instance, ICICI Bank gives three limits for daily expenses to Rs 1,000/2,500/5,000. There are quite a few other steps that one can take.

Save first and then buy: It’s very natural for parents to buy toys for their kids when they are small. But the problem occurs when the child receives more than what he needs. In case your child demands a particular gift, you can convey in a subtle manner “he needs to earn that toy, like how you earn your income”.

If the toy costs Rs 200, then put a tag of the same amount on the piggy bank. Then tell your child that for every chore that he does or helps you, you will pay him, say, Rs 5 or Rs 10 and he can deposit the same in that piggy bank. Keep a small diary (for kids more than 7 years) and note down the amount which is deposited. The chores can be very simple ones, such as cleaning his study table, keeping his toys in proper place, helping you lay the table for dinner or helping an elderly neighbour with her shopping bags. Try to relate the work that you do and how you earn your income. Once the required amount is deposited in the piggy bank, you can help your kid buy the toy of his choice with the money saved, or in this case, earned by him.

In case you are planning in advance for a small birthday party, then you can maintain a larger piggy bank. This will help your child understand that his birthday will cost more money and he needs to save more for it.

Likewise you can create a few piggy banks of different sizes and put a tag on it for different purposes, such as school stationery, picnic or toys. This will help him understand the significance of allocation and budgeting. Initially, the child may not take it seriously and may treat it as a game. But slowly he will understand the concept of saving and budgeting according to his needs.

Reward your child: Once your child starts following the savings game on a regular basis, reward him with an ice-cream or his favorite chocolate the moment he is able to save enough for the earmarked goal. Show him how happy you are to see that your kid has achieved a particular goal. At that moment try to relate your purchases. For instance, how you saved to buy your plasma television or your house and the feelings that you went through when you were able to achieve them.

Start early in life: Parents often make the mistake of waiting for too long to teach their children the savings habit. If you do, it is possible that it may be too late for your child to learn the virtues of saving.

Values and good habits instilled at an early age will go a long way in ensuring that your kid will be able to manage his financial life well when he finally starts earning in later years.

A six-year-old kid such as Ashish is exposed to a lot more information today than most would have been a couple of decades back. There are plenty of advertisements on the television, internet and books that specifically target children.

Companies know the kind of power children have over their parents and exploit this. By succumbing to a child’s demands, parents try to find the easy way out and buy peace at a price. For the children, there is peer pressure as well. If a friend has an expensive phone or an Ipod, wish to own the same thing. Worse still, there is significant duplication as well. So, an Ipod replaces an mp3 player when both play music.

We, as parents, are responsible to a large extent for most of the problems related to our kids. For instance, have we ever tried to make our children understand how we earn our livelihood? Have we tried to explain to them concepts of saving and expenses? One need not be a financial guru for teaching basic financial concepts to our kids. But following a few steps and consistently does ensure that things don’t get out The writer is chief planner, Proficient Financial Planners.

First Published: Sun, November 11 2012. 00:16 IST