During the ongoing Diwali festival, I am sure most of you must have spent a good amount of money on crackers, sweets, chocolates and apparels for your kids, in fact, the kids are also told stories and the logic behind the Diwali celebration, isn’t it?
So, why can’t we use the occasion of Diwali to teach them some basic financial behaviour and inculcate some good financial habits!
Here are five ways you can teach the importance of spending, savings and investments to pave the way for their healthy and prosperous future.
Pocket-Money, Budget and Instant Gratification:
I believe you must be giving them some pocket money as a regular affair. Along with that, what you need to do is to introduce the concept of a 'Budget', which almost doesn’t exist nowadays.
We Indians are well-conditioned to think about the budget every time we plan to buy anything. And the fact of the matter is that though we think of a budget all the time but how many times do we actually follow it?
You exceed your budget most of the times, don’t you? So, if you want your kids to avoid this trait, all you have to do is to train them to understand the trap of instant gratification.
You need to tell them to defer their expenses and keep them in limits and also train them to wait before buying everything beyond the budget to satisfy the instant gratification urge.
Actually, the idea is to teach them the concept of ‘less is more’ and how one can stay happy without actually having everything they want or see their friends using it. Though it is very difficult to say no to your kids, it has to change. If you do not teach them how to be happy with less, they may not be able to cope with many other displeasures in their lives while growing up and turning to adults.
The idea is to teach them the importance of defining their ‘wants’ and ‘needs’ clearly and why ‘less is more’ is very important to be followed.
Use Money-Related Games:
You can use your kid’s birthday party to imbibe them with some great financial learnings by making them play some money-related games which can help them learn the importance of basic concepts like saving, investments and spending.
Using cash and cards:
Due to the emergence of digitisation in the payment field, using cash has almost become non-existent. Your kids, unlike you, may not be able to get a chance to use cash and get the necessary learning of being careful in dealing with cash and money-related transactions.
To teach them to be careful about using money and cash, you can simply get them to manage the day-to-day transactions like buying chocolates or groceries from kirana stores. Even a 3 or a 4 year-old will be able to exchange money with the shopkeeper and understand the financial transactions like this. In fact, they may even enjoy this newly added accountability and confidence in their ability.
Get them to use a bank account opened for them:
If you have opened a bank account for them, you can have them involved in any of the transactions from that account, say, opening an FD or investing in their name, you can show them how it works online versus physically by visiting a bank. The kids in a higher age group would be more interested to learn the art of money actually flowing without exchanging the physical cash.
Tracking and managing money on mobile:
Most of the kids know how to use a mobile and how to download apps. If that is true for your kid, then why not ask them to download a good mobile app which offers an expense tracker that helps them manage their pocket money.
Do not make the mistake of underestimating your child’s capabilities to understand finances and in fact, everything said in this column will work on their psyche and help them grasp the importance of being careful with money subconsciously at every stage of their life.
The challenge with our education system is that it doesn’t teach us how to earn and manage our money and we learn it only after we start earning money and by hard means.
So, let’s break that practice this Diwali and let our children understand the importance of money and how to stay happy with less will help them greatly.
Happy teaching, Happy Diwali!
(Rishabh Parakh is the Chief Gardener at Money Plant Consultancy.)