Teach your child how to manage money

Harish Sindhwani remembers the days when his investments used to earn a return of 1 per cent a day. When he had to borrow money, he was charged an interest rate of 1.25 per cent a day. In those tough times, one had to manage one's finances really well. With interest rates like these, even the smallest error brought instant ruin. Of course, the upside in making investments was huge. Sindhwani recalls how he managed to make a major purchase by investing the money and waiting just for two months. He still remembers what the purchase was-a cricket bat. The bat was for Rs 25 and he had just Rs 15 saved up from his pocket money. He invested it at 1 per cent a day and was able to buy the bat in less than two months. Harish was 12-year old at the time and the financial institution that offered these borrowing and lending rates was his father. Senior Mr Sindhwani-who is now retired from his job as an economics lecturer in a college-no longer offers private banking facilities to his son, as his son is now a successful businessman and a very savvy investor. Harish credits his success in business and investing entirely to the fact that his father taught him everything about money at an age when the only thing other children knew was that money magically flowed out of their parents' purses and got them whatever goodies they asked for. There is a lesson here that most of us would learn. As parents, most of us are increasingly obsessed with doing the best for our children. Perhaps, this is a side effect of having fewer children. But the time, as well as the money, that parents today seem to spend on their children seems out of proportion to what it was in previous generations. Of course, the neuroses of modern parenthood is something that an investment magazine is not qualified to comment on. But we are sure of one thing-if our children learn the basics of handling money, then they will face far fewer money-related problems as adults. No matter what they do in their lives and how they handle life's inevitable successes and disappointments, a practical lesson on money is something they will definitely need. Here are some guidelines on how to teach your children to manage money. Money is not a taboo Many parents think that money matters should not be discussed in front of kids. They consider it their duty to protect children from the 'harsh realities' of the world, one of which is money. The result often is that children grow up with the impression that money doesn't have anything much to do with the necessities of life like food, housing and education. Instead, it is a fun thing that's connected with going out to eat at a restaurant or watch a movie or buy toys. And you can't blame them for thinking that because those are the only kind of expenses that they know about and participate in. When it comes to the financial education of your children, two steps should be followed. The first one is to know how money wor

This article was originally published on November 14, 2020.