Rarely do parents discuss money with their kids. Money is an “adults only” topic in India and kids are not supposed to be worrying about it. But the times are changing. It is up to parents to teach their child financial education at an early age and then develop these skills as they go along. Here are six key things that parents must teach their children starting at an early age and move on progressively as they grow up.

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Power of basic budgeting
You can start this as early as the age of seven or eight years. When you send your children to the neighbourhood grocer, let them take responsibility for the cash. This will instil financial diligence in them.

Most parents give pocket money to their children. Let them start maintaining a record of where they spent their money. At the end of each month, sit down with them and explain where they could have spent less and where they have spent more. This will underscore the importance of budgeting and analysis.

Teach them about banking
Twenty-five years back, banking was all about going to the branch of a public sector bank and teaching your kids about deposit slips and withdrawal slips. Now, kids have to be taught about internet banking, money transfers, UPI banking, mobile banking etc.

In the new age of banking, your relationship with your bank account is either through the ATM card or through internet banking. Also, teach them the importance of secrecy and internet security when dealing with finances online.

Why savings matter
Observation is a much more powerful tool of learning for most children. Teach your child not only the importance of savings, and also exhibit the passion for savings practically. When your children see you working hard and stashing away money for a rainy day, they will understand the importance of saving.

Try and reward your child for saving money. Let them hunt for best bargains and best deals and let them see the wonders that savings do. Show them how a piggy bank saving can grow over time. The idea is to instil the importance of savings in children at an early age.

Keep limits on debt
Children need to be taught two things early on in life: the dangers of too much debt and the dangers of high-cost debt. Most easy credit instruments like credit cards, personal loans and money-on-tap loans charge high rates of interest and are best avoided. Teach your children about the judicious use of debt. Such lessons are best learnt at an early stage.

Wealth creation through equities
You need not start this education very early, but ideally when your kid is 16-18 years of age. They need to understand the importance of wealth creation. They need to realise that just letting your money idle in a bank account does not create wealth. You need to put your money to work and for that you need to take risk.

Teach them that returns are commensurate with risk, but high risk does not automatically guarantee higher returns. They need to learn that while risk taking is important; random risks will not get them too far. They must be taught how the risk of equities can be mitigated over the long term with live examples.

Importance of financial goals and planning
Finally, you need to pass on the idea of setting goals and financial planning to your children. You need money to meet these goals and that is only possible by planning early and making money work hard for you. Above all, they need to understand that financial goals are all about articulating your dreams in financial terms. Only then can one plan for the same. Also instil in them that anything well begun, is half done and anything well planned is almost done.

By, Vaibhav Agrawal 
(The writer is head of research and ARQ, Angel Broking)