Most parents think that they do not need to teach their children how to manage money and the value of managing money in the right manner. They believe that this will be taught to the children as part of their curriculum in schools. The reality is very different. Personal finance is not taught in schools and by the time children reach college it may be too late to correct this mistake. Therefore, the onus falls on parents to teach their children this critical skill. As parents, we have to see ourselves as the primary source of financial education for our children. The earlier we start educating our children, the better the chance of ensuring that our children grow up to become financially literate and responsible people.

We are listing down some strategies that parents can use to share knowledge of money management:

Lessons should be unique if you want the message to sink in. To start with, parents need to sit down with their children at eye-level either at a table or in the child’s room. Keep the mobile phone and other distractions aside for some time and start by emphasizing the importance of the conversation. It needs to happen at their own level and in language that they understand. Irrespective of how young the child is, the effort of making this conversation happen is worth every rupee.

Money mistakes made by parents in the past can serve as a good guidance for teaching children about money. Past mistakes is not a disqualification for teaching but can in fact help to get your point across to children. Parents can explain how the mistakes could have been avoided and provide documentary proof as a support. Children will grasp the learning much faster if have actual figures to refer to; parents can explain how much money was lost because of the mistakes.

Reinforce your Teaching constantly: Make it a point to involve your kids in any transaction where you have any opportunity to save. Even if it is saving of only 5% - 7% on account of a cash back offer from your debit or credit card, it can go a long way in reinforcing the benefits of saving money.

Encourage children to save more money by opening a bank account for them. Even though the bank a/c may not earn much interest, it will go a long way in making your children appreciate the benefits of saving money for the future.

Budget pocket money or allowance: First of all, it is a good idea to give an allowance to your kids on a defined frequency. There can be various options to consider on how to pay an allowance to your child, namely:

1. "Earn money for tasks" allowance: The child is expected to complete certain house work or tasks on a regular basis and is paid for his efforts. The child will see a direct correlation between the effort and the money he or she receives. If for any reason, the task is not completed, then the child is not given spending money.
2. "Pay as needed" allowance: Children do not receive an allowance on a regular basis but request their parents for money as and when required. Here the child may or may not be helping the parents with household tasks. Secondly, as this money does not come on a regular basis, the child may not be able to save for future expenses.
3. Unconditional allowance: The parents give a fixed amount to the child on a weekly or monthly basis without any precondition of doing any tasks. This method allows the child to manage money on a regular basis similar to a salary payment. The downside of this method is there is no correlation between efforts and the payment made.
4. Hybrid allowance: Here this child is expected to do certain basic tasks for free as a contributing member of the family. The child will be paid for completing larger tasks like cleaning the fans, windows or cupboards. Whenever the child wants more money, he or she can take up a task or job and receive payment on completion of it. This method teaches the child that the harder he works, the more money they can earn. This is of course, very similar to our real world.

Whichever method you as a parent choose to pay an allowance to your child, encourage them to create a budget before they receive the money. For e.g., if the weekly allowance is R1000, you can suggest that R200 should be saved, R 200 can go for charity (a very important concept your child needs to learn from a young age) and the balance can spent as they like. This budgeting will help them plan for their future purchases and also help them manage their finances when they become full grown adults and earn their independent incomes.

Let us know put down some action plans for execution of the above strategies. As Steve Jobs once said, "To me, ideas are worth nothing unless executed. They are just a multiplier . Execution is worth millions."

Let’s start with shopping for your groceries at your nearest supermarket. Shopping with kids can be a nightmare; or a great way to teach them about budgeting, if you can spare some extra time:

Create a food plan followed by a shopping list: Get your children to help create a food plan for a week; then create the shopping list to fit your weekly grocery budget. This will teach your kids about budgeting, planning ahead and checking out any discounts being offered.

Getting the best price: Comparison shopping is a great way to teach kids about money and how to get the best value for your rupee. You can help improve your child’s math skills by challenging them to identify the best deal based on the product quantity or number or servings.

Making smart choices: Encourage your child to decide between several competing brands including the store brand. You may end up saving a lot of money provided you are comfortable with the product quality of the store brand, if you decide to buy it.

Matching discounts and sales with your shopping list: It may be worth your while to check out the discounts and sales offers the supermarket is offering. This will help your child to develop bargain – hunting skills.

Give your child a budget to spend on his treats and snacks. This will teach them to spend on their treats within their budget and not go overboard. Children love it when they are given the freedom to decide some part of their life. Now let’s move onto banking which is slowly and steadily moving the online route especially with younger generation.

Though a visit to the bank is still required if you want to deposit a cheque, fill a nomination form or meet the branch manager. It is a good idea to take your child along so they can better understand in person how a bank works.

Deposit savings: Children should be encouraged to deposit their piggy bank savings into their savings a/c on a regular basis. You can create savings milestones with your child which if reached within a particular time frame can be enjoyed with a small celebration or gift for the child.

Show your child the money: Children are fast learners by nature and very keen observers. Teach them how to deposit and withdraw money, how to fill up a deposit slip, how to operate the ATM etc. This will go a long way in making them understand the basics of money management.

Education literature: Check with your personal banker if they have any programs or literature for teaching children about basic banking. Banks may also provide you with educational coloring or story books which can used for learning and fun.

Finally, let’s talk about the large retail chains like Star Bazaar or Croma. These stores not only offer loads of electronic gadgetry but also plenty of stuff that your kids may wants like clothes, toys, games etc. A nightmare for all parents surely, but also a silver lining… opportunity to teach our children.

Economy and money: This is good place to teach your child about the working of the economy starting with why businesses are set up, how they grow and prosper, how the owners or shareholders are rewarded etc. Why does the store sell so many items, why is it organized the way it is?

Sales and discounts: Retail chains are famous for offering discounts and sales around festivals like Diwali, Holi etc. They also offer discounts on electronic items like TVs during the IPL season. Children can be taught how shopping smartly for electronics and other items during such events can help save a lot of money. On the other hand, just because a particular item is available at a huge discount is no reason to buy it.

Needs vs. Wants. Before buying any item, teach your child to check if the item(s) passes the following conditions:

1. Have they compared the prices with other retail shops and online shopping websites, especially for high priced items?
2. Is the item a need or want? Wants are discretionary.
3. Are there any discounts you can avail off (through your credit or debit card)?

If your are willing to teach your children about money, you can find a way irrespective of the choice of venue. Be creative in your approach and help your children understand why savings and budgeting techniques are critical real-life skills for them to learn. These skills will last them a lifetime and they will remember you for taking the time and efforts to impart them.

To conclude, can you rewind back to the times when you were young and your parents took the time to teach you about money management? If you are finding it difficult to remember, then this is the time to make up and put your children on the right path. The average Indian is struggling today as they have not saved sufficiently for critical goals like retirement and child’s education. There is a constant struggle to manage monthly expenses as the basics of budgeting were not learned in their young age. Please do not let your children commit the same mistakes when they become adults.

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