Teach your child about power of compounding investment, this Children's day – know what experts have to say

Instilling good habits within the children is the core focus of any parent. Children can learn virtues of savings and investment from their parents. Here comes a brief tutorial for explaining and teaching the child, right etiquettes of savings and investing of whatever money the he has.  

The concept of savings through the piggy bank has been followed for quite a long in society. But how money could be invested in the right instruments is also an integral part of his upbringing, besides teaching him about saving. Right investment could lead to good returns which will appear rewarding for your child. In this regard, wealth management experts on account of Children’s Day give a few useful tips to parents and their wards. Children’s Day or 14 November is celebrated as the birth anniversary of India's first Prime Minister Pt Jawaharlal Nehru.  

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Harshad Chetanwala Co-founder MyWeathGrowth points out, “Making children understand the importance of money should be the first step where they learn valuing the things like their toys and other expenses through parents hard-earned money can play a significant role.” 

He makes a point while expressing that most of the children are aware of savings thanks to the traditional piggy bank.  

Emphasizing on the compounding investment, Chetanwala states, “The power of compounding is another extremely important concept that can help them understand how the invested money can grow over time and how investing can be looked at from a short term or long term perspective.” 

“Teaching them bank account and interest from the savings account can be the first step towards learning to invest and then consider making them understand other investment options like the stock market, the wealth management expert mentioned. 

Similarly, Ladderup Wealth Management MD, Raghvendra Nath believes, it’s important to educate children about finance and investments, and from an early age induct a habit of saving/investing. This will intellectually prepare and enable them to independently take investment decisions. 

“Normally, equities work better while investing for children’s long-term needs and requirements. But, for the purpose of imparting knowledge about investments both equity and fixed income are important, the managing director of LadderUp Wealth Management mentions.   

While citing an instrument for investment and savings, Raghvendra Nath suggests, “Mutual fund investment or opening of demat account could be done in the name of a minor, but it will be operated by the guardian till the minor becomes major.”