As a parent, you want your children to be financially secure all their lives. Even if you invest in insurance to take care of their needs, it is just as important to train them in important financial skills.
It is necessary to teach kids that applying for Credit Cards online is like requesting a loan from a responsible friend. Similarly, opening a kids' bank account is like having a secure piggy bank for them which helps their money grow. Thus, we teach them that building savings is just like nurturing a sapling that will grow to benefit them in the future.
Importance of early financial skilling
The Reserve Bank of India (RBI) has identified five groups that need financial skilling - children are one of them. Early financial skilling empowers children to understand the value of money and learn to manage it better. Your child can learn the basics, such as budgeting, saving, and the value of instruments like Credit Cards, early on. Today, you can even open a kids' bank account seamlessly. All these actions collectively nudge your child to enjoy a financially secure and stress-free life in the future. In turn, you get to enjoy peace of mind as a parent.
Teaching basic financial skills to kids
Here are some tried and tested ideas that pave the way for financial literacy in childhood:
1. Encourage money-related conversations
Money is a commodity that you use, literally, every day. Take advantage of this opportunity to seed simple conversations on money. For instance, when you go shopping with your child, demonstrate why you choose one item over another, and the role of money in decision-making. You can also try introducing fun games. For instance, encourage your child to identify different denominations of money, or add up multiple notes, with the promise of a treat at the end of a successful game.
2. Make budgeting fun
A simple way to get your child interested in budgeting is to apply it to their own life. For instance, suppose your child needs a new pair of shoes, books, or a toy. Allocate a budget within which they need to select an item. If there is money left over, they can get an ice cream or chocolate.
This activity puts the onus of decision-making on your children, while also generating excitement over their new acquisition. Kids' parties and holiday planning are other areas where kids are highly motivated to budget. Pretty soon, your child will master budgeting!
3. Introduce the idea of saving
Saving is a crucial pillar in financial management. To start, tell your child to put money left over from shopping trips into a physical piggy bank. An attractive piggy bank manifests a physical idea of what saving looks like.
Also Read: What is a Savings Account and how does it work?
Soon, your child can graduate to having a real Savings Account. You can open a kids' bank account, which offers all the perks of a traditional bank account, from a Debit Card to insurance coverage. All the money saved through smart budgeting decisions and monetary gifts received can go into this account. As your child’s bank balance grows, they will feel more motivated to build more financial skills.
4. Seed the idea of credit
Credit Card debt is one of the most expensive debts. When your child finishes college and starts earning, they will be eligible for a Credit Card. However, most young adults are ill-prepared to use one efficiently.
You can give your child a headstart with a joint Credit Card application online once your child turns 18 years old. Set a small credit limit and introduce them to reward points. Establish some ground rules on Credit Card usage. For instance, when and how they must pay the bills each month, etc.
Also Read: What is a Credit Card?
The Takeaway
By nurturing financial skills early on, you are setting your kids up with life skills that will empower them throughout their lives. Start with the basics: saving, budgeting, opening a kids' bank account, and understanding how credit works.
Partner with Axis Bank, which offers a high-value Future Stars Saving Account to give children below 18 years a head start to a secure financial future. Your child will receive a Visa Platinum Debit Card, earn attractive interest on their Savings Account, and personal accident insurance coverage of up to ₹2 lakhs. By the time your child turns 18 years old, they will be equipped to be more financially responsible.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
