Piggy Banks To Budgeting: Teaching Children Lessons For Life

A proud grin hides behind the paper the toddler held up for her parents to see.

The wonky walls drawn with wax crayons varied in colour. The red roof of the house may be slanted but it manages to hold the black chimney well. The strong smoke makes the blue clouds look a bit murky.

“Mumma, I will give moneys to the builder to have a red roof for my house,” said the child proudly.

As we live, learn and observe the world around us, we naturally develop a sense of what money can do. But for parents, money can be a heavy conversation to have with kids and they often struggle to teach money management.

It is not forced lessons but it is slow, simple and solid principles cultivated into their lives that will help children become financially responsible.

“Piggy banks get them attuned to the habit of saving something,” said Mrin Agarwal, founder of Finsafe. Introducing the idea of saving some of the money that they are given will help them comprehend the concept of saving and managing money as they grow up.

“Saying ‘no’ is to let the child know that they can’t have everything they want,” said Agarwal. Most parents get their children most of what they ask for and give in when children fuss asking for more things. Though saying ‘no’ may be difficult, Agarwal insists that simple starts like this can go a long way. Things as simple as saying 'no' to an ice-cream at a mall and standing by that decision is a good start, according to Agrawal.

Another good place to start would be to take children shopping and to familiarise them with prices. This according to Agarwal, can help them gauge the value of money and materials.

Parents can also train their children by giving an amount to spend on the things they like, which will help them to think about prioritising what they really want and compromising on a few things as well.

Not every part of teaching money management needs to be seen as a separate task but this teaching can spill into causal conversations with children.  

“Casual money conversations on the dinner table,” according to Agarwal, will help kids grasp concepts. If parents are investing for their college, they can let them know. Keeping them aware of the purpose of the investment will help them understand and eventually value the sacrifices made as well.

Going away to college lets children make their own mistakes and learn lessons on their own. It is important to learn to budget the expenses and setting the spending priorities in place, according to her.

As loads of things are new and the difficulties of moving out gets real, parents might want their children to spend as much as they want to and stay happy. Agrawal advocates against this and highlighted the need for parents to let them make mistakes, learn and also take a stand.

“They will be financially responsible and will be able to manage during difficult times,” said Agrawal. Parents can also offer rewards to help children push through the phase by offering to boost their savings if they stay within the set budget and manage to save.

Many parents like to start investing for their children’s education early on. More often than not, picking the right product to invest in, is difficult. She cautioned that misspelling of such products are often done to parents who are eager to invest for their child’s future.

“Insurance plans come with high costs and don’t always beat inflation,” said Agarwal. There is more than 10% inflation in the education system in India and these products do not account for the increasing inflation.

“Investing into equities is good if you have some time before they’ll need to use the funds,” said Agarwal. Balancing dependence on kids during old age and spending on the experiences that parents want is also something that needs to be intentionally done.

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