How To Teach Investing Habits to Children

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Children are special for every parent, they hold a special place in the hearts of every parent.

Special thanks to my Daughter’s school, they have gifted a piggy bank to all their students including my child for a recent event. This made me think of this post.

How to teach about savings for Kids aged 3 to 10Years

Kids will grasp very fast, its not early if you start teaching 3-year-old kid. You only need to tell them in a language what they understand and with patience.

  • Grab a Piggy Bank from a nearby shop.
  • Put all the coins whatever you get at the end of the day from your day to day spending, like 1re, 2rs, 5rs, and 10 rs Coins.
  • Slowly tell your kid to start adding coins into the piggy bank. tell them this money will be used to buy their favorite items on a later date.
  • You do this every time you have coins with you and on an average Let’s say you add around 500rs a month.
  • And it will grow to safely 5000Rs in 10 to 12 Months time.

You may like to read Why you should never go for Traditional Endowment Life Insurance plans? Term insurance is the Best option!

Now that She/He has 5000rs in hand, we can show them what all we can buy with such small savings we made over a period.

  • How many 100s of Chocolates
  • 100s of their favorite mangos
  • So many ice creams, Popcorn
  • Many Books, pencils, erasers
  • Toys to play
  • So many others what She/He likes

This way for sure Children will understand the importance of saving small coins every day and using for big purchases.

You must not forget to tell your children

“If you buy things which you do not need, you will not have money for things which you need”

Similarly we can also adopt such savings for each goal in our life.

You may read Personal Finance- Popular Investment options in India

Invest in your Kid name

Instead of investing in Child themed Insurance plans or child themed mutual Funds, I feel you should consider investing in normal Open-ended Mutual fund schemes in the name of your Kid.

  • Investing in kids name is nothing different than in your name, technically there is no difference!
  • All tax applicability, bank account etc remains the same, and it’s completely online.
  • Your kid name will be printed on the account statement along with your name as guardian.

The main reason for investing in Child name is, when He/she grows up to understand account statements with their name printed on that, the first moment they will realize is just 1,000Rs  each month invested a few years back is now so much money!.

They will realize the magic compounding at a very young age which helps them to accumulate wealth at a much faster way.

How to teach investing to Children above 10 Years age

By the age of 10 years, children will start understanding  Life goals.

Try investing a small amount every month for any goal of your child need and desire, like buying that costly Musical instrument, or a dream trip to overseas, or any similar one as may suitable for your kid.

  • Invest in safe Liquid funds if the duration of the Goal is within 3 years.
  • You may consider investing in Equity Mutual funds if the Goal is after 3 years.

Starting with just a minor amount today will eventually make you achieve your Goal over a period of time as you plan.

In case if you are lucky enough to get your required amount before the planned date, For sure you withdraw your money and fulfill the dream early. Remember to explain the whole process to your Child.

You may read about investing in Direct Mutual funds

Teach about Investing in Equity/stocks

  • Let’s say you invest in MARUTI, and if you see a BALENO car of MARUTI on road, you can show your child and proudly say that You are one of the owner of the that Car manufacturing company, all the profits made by that company will be shared with you.
  • Similarly, You can explain about PVR, INOX movie Theatres.
  • You can explain about Metro constructing company like L&T, as the work of Metro progress in your city, you can tell the growth of the company & the profits.
  • Tell about HDFC BANK, every time if you go there to withdraw your money or use their card.
  • Explain about software companies like Infosys- IT major behind IRCTC website 🙂

Conclusion: with all the above, If he /she makes an investment with their first month’s salary,  that’s a big achievement, how so ever small it may be. which most of us could not do.

As you are all aware of how much high difference it makes, if you start investment just a few years to reach your Financial Freedom!. These days Having No Debt/ Loans is the biggest Freedom!

Read about NPS – Take additional tax advantage

How to create all the Beautiful Memories of your Child

This is a well-known way of preserving memories of your child, most of you may be knowing, but very few will be really doing it in reality.

  •  Create a Personal Email id like Gmail/Yahoo on your kid name.
  • Start sending emails to that id, with all the memories of your kid, include all photos, Videos and write how you feel those movements.
  • Start sharing both good and bad, Life is all about these.
  • You can save all precious dates of schooling etc.

Imagine movements when she/he grows up and opens this email id and feels all the things happened in the past.

This will be the most precious gift that anyone gift to their child.

Start creating your memories account today, no matter what your kid age is. Just create and start.

You may read How to pay Zero tax for income up to 12 Lacs in next FY 2019-20 onwards?

All the best! Happy investing!

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Disclaimer: I am holding shares of all the companies mentioned in this post, as on the date of publication of the Post.

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  1. Good thoughts. Very easy ways . thank you

  2. Well explained . I like your posh disclaimer. Wonderful .

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