Nothing surprising about this statement about teaching a child about retirement savings as explaining about budgeting and personal finance is quite a challenge. With the Gen z children it’s never too late to start teaching them about money habits. How should you start of teaching them about money, savings, budgeting and its benefits?
Start with Pocket money :
First start giving them pocket money when they ready to handle money. Make them help around the house and give them a monthly allowance only for the work done. There are plenty of creative ways to make earning fun, so it’s up to you to figure out what you can make them do for work for money.
Teach them to save :
The next big step after giving them pocket money is to show them how to save it. You would have started by buying them a piggy bank when they were small kids. Now the next part is to start showing them how to save money for the big picture. And by this we don’t mean toys and books it could also mean saving up for camera, or a cycle and as they grow bigger you could look at how the youngster would repay an education loan taken by you in the coming future.
Explain the rates of everyday living :
Take some time out and explain the costs of your daily expenditure, like food, electricity, and your entertainment bills. You salary amount should be shared with your child when he is old enough to understand and tell them to value the money earned vis a vis money wasted.
Teach them how to do banking :
When your child is about 8 to 10 years old, take them to a bank and show them the banking process. While most banking tasks can be done online or at an ATM, it is still important to explain how to fill out a deposit and withdrawal form. This is a good time to explain how a check works and the proper way to fill one out. You can explain how interest works, how it is calculated and when it is deposited to the account. Many adults find banking to be complicated; explaining how the process works can make them more comfortable with banking procedures when the time comes.
Open a Child account :
With the new private banks coming out with interesting options which includes a child account , you can open one in his/her name and encourage the child to save money in the bank. That way they get a hang of how to operate, save, withdraw and use money. You will also have the option of keeping track of their expenditure since the child is a minor and as parent you will be the guardian and get the SMS banking alerts when there is a transaction.
Keep money safe and keep track of it :
Send them to get small items from the grocery stores and when they get back, ask them how much was spent and what was the change they got back. There are chances of them misplacing money or forgetting the change. This way you can remind them to keep and count money carefully and if they lose money it would be forfeited from their pocket money as a fine for losing it.
The importance of retirement savings :
Now we come to the part mentioned in the title… Talk to them about the importance of starting a savings account for retirement benefits also. You could start teaching this when they are in high school and maybe starting their first job. Provident funds, ESI’s tax planning, loan repayment etc. can be explained and hopefully these suggestions can help you introduce your child to finance, help them understand the importance of money and the responsibility they have to protect it.
Hopefully by the time they are all grown up they will acquire the skills need to be financially independent and who knows they could end up teaching you a thing or two about the latest financial plans in the market!
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