A guide to raising financially responsible children

The early bird catches the worm. This proverb holds special significance in the world of finance and investments . Just as money invested early on compounds over time to deliver higher returns in the future, so do financial discipline, knowledge and sound decision-making skills imparted to children . Children at an impressionable age are naturally curious and likely to absorb new information readily if presented in an exciting format. Children have a shorter attention span and relatively less patience for tedious tasks. However, they are always eager to engage in games, puzzles, quizzes and contests. Parents can get creative by drawing up a goal chart that sets the time frame and amount to be saved. One important lesson is understanding opportunity cost. When children realise they must forgo purchasing a video game to buy a fancy jacket instead, it will help them weigh their decisions carefully and spend wisely on what matters the most. Most parents will hand out an allowance or pocket money to their kids. However, this income can be supplemented by paying children to do chores around the house, such as tidying their room, taking out the garbage, or walking the dog. Older kids should be included in financial discussions and decisions at home – from budgeting household expenses and planning a family holiday to finding good deals on groceries and online shopping. They should be encouraged to offer opinions and receive constructive feedback to help them learn. Teachers can also incorporate financial activities in the classroom. For instance, they can ask children to create a budget for school events like an end-of-year dance or a fete. Reading is one of the most powerful tools for children to achieve financial literacy. Books like The Berenstain Bears' Money Book and Alexander, Who Used to Be Rich Last Sunday are good starting points. Even movies and podcasts can help to educate children on finance in a fun way. Parents, guardians and educators have many tools at their disposal to help children grow into financially savvy and independent adults. Part-time jobs teach children about debt, the risks of overspending, budgeting and keeping track of finances. Children can also look to play certain value-learning games such as Cashflow , Money Metropolis , Financial Football , Money Bags , The Game of Life and Payday . Parents should open a savings account for their children and allow them to manage it under supervision. This can be used to save money to buy their first car or fund their college education. Parents can also set up virtual bank accounts for their children using apps such as Greenlight and FamZoo. Both apps have a built-in chore feature. FamZoo is more customisable because it allows parents to assign specific chores using online charts. It also offers a spend, save and give plan to split the kids’ income into designated accounts. Other noteworthy apps designed for kids that facilitate budgeting, saving and responsible spending are iAllowance, BusyKid, and Bankaroo. Learning about debt management is also a crucial lesson. Young adults should be encouraged to use a credit card co-owned by their parents. This way, parents can step in and course correct if their child is not budgeting or managing their expenses wisely. It will also help children to learn the importance of not missing monthly payments and building a solid credit history. Providing children with real-life experience in handling money goes a long way than just talking about it. The world of social media has introduced children to global brands at an early age. Children can practise investing in the stocks of their favourite brands using a custodial investment account if they’re not of legal age. Before dabbling with real money, children can use online simulators like the Stock Market Game to learn the basics of investing. Parents should also consider opening a retirement account for children in their late teenage years. This is also a good option for children working a part-time job or doing an internship, as it will help to instil the habit of saving for their long-term goals. Vijay Valecha is chief investment officer at Century Financial

A guide to raising financially responsible children

Providing them with real-life experience in handling money goes further than just talking about it