This Children’s Day, I could have started saying “Pandit Nehru was born on 14 Nov. 1889 at Allahabad. He was fond of roses and children…hence this day is celebrated as Children’s day…!!”

I did not do that simply because his family will over do it….even today and the bill will be paid by us…

However, lets us see what we can teach our kids about money…

Given pushy parents and super pushy media, there is a lot of things we teach our kids. However one thing clear is with all this exam, vacation, exam, unit test, one thing is clear. Nobody is teaching your little darlings anything about money. While our children’s teachers share responsibility for teaching them to read and write, they won’t do much to help our children develop basic financial literacy skills. Beyond simple addition and subtraction, there just isn’t enough time in the school day to do it all.

So what’s a caring parent to do?

Take your child’s money-management education into your own hands, of course. Here’s how. It’s important to remember how your kids think when it comes to money. Most children are concrete thinkers who can demonstrate progressively organized and logical thought but have a limited ability to think abstractly. Preschool and elementary-aged kids will have trouble understanding abstract concepts like inflation, interest rates, and saving for a college education that is 12 years away.

However, when my year old daughter tells me the following things, I realize that she understands money:

Daughter: Dad, I need money to buy a gift for Mom

Self: Why don’t you use what is in your piggy bank?

Daughter: Dad, coins do not buy anything, I need notes!

At five, she understands that bread costs Rs 22, a car Rs 12 lakhs and a house Rs 100 lakhs. This is only because of constantly talking with her about money – unemotionally and factually. That’s why, when I told her that we couldn’t buy the five feet tall teddy bear because we don’t have enough money, she was worried that we wouldn’t be able to buy bread. To her, ‘no money’ meant, quite literally, that our pockets were empty.

I should have said, ‘We choose not to spend money on that so we have enough money for other things we need to buy.’ Understanding the way your child thinks is the key to providing him or her with a quality education in money management.

Here are some ways to help your literal thinker learn about money:

1. Piggy bank:

Buy your preschooler, a piggy bank and give her a stack of coins to put in it. Ask your child to sort the coins in a variety of different ways – shiny versus dull, big versus little. Know that he or she won’t understand for some years that a rupee saved today can be better than a rupee saved when she is 30 years old, they should get a touch and feel of money. I make my daughter pay money at the shop so that she understands the difference between coins, a small note and a big note.

2. Pocket money

For older children, establish an allowance so he or she can begin to make independent money decisions. Some folks will advocate linking the allowance to certain chores; I prefer establishing the basic chores (e.g., making the bed, cleaning their own room, and setting the table) as something each person does because they are a part of a family and it is their job. Be very careful that they do not become too money minded and keep asking, “How much will I get for looking after granny when she is unwell?” However, giving your child ‘extra’ tasks (like washing your car) for which he or she can earn money can teach her the satisfaction that comes from working for a goal. Your child will also understand that the more work that’s done, the more money he or she earns – a valuable life lesson. It also helps – my daughter gets Rs. 50 per month for generally being good, doing some non core work, etc. so when we go to a shop and she sees something which I will not buy, she translates and says “I will have to wait for 11 months to buy this”. T

Also telling them ‘saying your slokas regularly for 20 days non stop will earn you a new game’ is not about bribing, but about negotiating and finding what your kid wants. For example if she is willing to say her tables loud and clear for 30 days without a break, and you agree to pay her Rs. 40 for every day of good performance, you can allow her a discretionary Rs. 1200 next you go shopping. Of course it might include rules like ‘you cannot buy another teddy or Barbie, but you can see them valuing things.

All this is very, very useful later on in knowing the difference between “price” and “value”.

3. Value inculcation

One friend has done a brilliant ‘value inculcation’ in his son. He gives his son 50 coins of Rs 5 each. The kid needs one coin every day at the recess. So, 22 of them are precious. He has only 28 to spare every month. Now when the kid says he wants a new tennis racket or new tennis shoes, my friend quotes a price of say ‘50 coins’, it takes his son about three months to accumulate the same. And he treats each Rs 5 coin with far greater care than a 500 note. And it teaches him the value of delayed gratification. A good way to control the Y gen.

4. Introduce financial jargon

Get your older children to understand words like saving, investing, donating, pension, financial goal setting – they will thank you in the future.

5. Bank account

Opening a savings account, touring a bank vault, using the rupee-counting machine, comparing prices, and paying for items and receiving change are a few everyday ways to learn about money. My daughter was so happy that she opened the bank cover – and quoted the “pin” number. What she was actually reading was the pin code on the cover! But that is a teaching opportunity for me!

6. Summer jobs

Encourage your child when he or she tries entrepreneurial ventures like buying crackers in the wholesale and selling in retail, baby-sitting for the neighbors, or starting a dog-walking service. There’s no substitute for learning on the job. I grew up in a Gujarati locality – where everybody had a business, so finding my daughter a summer job will be easy for me. However it is not very difficult if you are not fussy.

7. Lead by example

Last, but not least, be mindful of how you talk about money. Do you complain about bills, fret about money, and always use negative terms about finances? Don’t be surprised, then, if your kids feel negatively, too. I have heard about a father who has 2 houses in the same building – they stay in one and have rented out the other. The father kept saying ‘what will happen if our building crashes – I will lose both the flats’, another father who kept saying ‘psu jobs are the best…and they are secure’. Sadly that man’s attitude is also passed on in toto to the son and the daughter. The man who was in a PSU has retired 4 years ago and is still awaiting his provident fund – I believe the union is holding it up!!

If you need some financial refreshing of your own, make full use of your this blog. I hope to fill it with right financial gyan – without forcing you to buy anything. Getting yourself on the right financial track is the best lesson of all for your kids. So, parents, remember that some lessons still start in the home. Managing money wisely is one of them.

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He talks of his father selling his land. He talks of not having a house to live, but still studying for his IAS.

His father says I would have sold my kidney to make my son an IAS officer. And the son says proudly that his father used to go walking, but insisted that the son should go by auto…because he has an exam.

I quite liked the sacrificing spirit. However, I did not like the video on 2 grounds:

1. The father (and presumably) son duo did not know anything about IAS as a career – except that the guys had tremendous power.  Normally to the normal person authority means huge sums of money (this is a Bihar story, so dowry too).  If he is planning to be an honest officer, is this job of a great attraction? Frankly I do not know or do not have an answer. After all each person has to answer that question for himself / herself.

2. Parents spending on kids is fine, but within limits. For one such ‘success’ of getting into IAS, surely the world is full of IAS dropouts and rejects. How will such fathers recover their investments? I really do not know. Even this kid did not look like a 22 year old. He must have been about 26-7….so there is an opportunity cost also.

Should parents sell off everything to educate their children? Not asking people who have money for EVERYTHING…

Asking those parents who have (say Rs. 5 Lakhs) – should they give it to his FATHER who needs the money for treatment of cancer, or his daughter who wants it for her MBA (or marriage) or use it for his own retirement?

Not easy answers, needs some soul searching and cruel decision making powers. To me it is scary!

3. Also look at the huge risk involved. If the son has an accident (therefore incapacitated to hold a job, or dies) what happens to the father’s old age.

It is easy to applaud the results of a risky journey, it takes a risk manager to understand the risks that the person undertook while doing the trip.

All the best to the IAS officers…and may this kid do well.

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Name:  hidden           Age: 23          Profession: Service
1. At what age do you plan to retire? Have you started saving for retirement?

I plan to retire when I have accumulated enough money for my post retirement life.* And yes, I have started investing for creating my retirement corpus. I have invested in a couple of Systematic Investment Plans – one of which is a tax saving scheme (Elss fund) with a leading fund house.
(the schemes are x and y)

2. Do you know how much you will require after retirement? How have you calculated the amount?
I have attempted some crude calculations – but the whole event is so far away that I do not think the figure is anywhere near accurate! Have not bothered too much about the accuracy – but I hope to accumulate about Rs. 5-6 crores by the time I reach my 50s. This will happen by stepping up my SIP from about 9000 presently to about Rs. 100,000 per month by the time I am in my 50s. Have realized that the earlier I start and bigger the amount, the greater will be the corpus*. My expected returns are in the region of about 14%p.a. – or in any case a rate superior to Public provident fund which will yield about 8%p.a. I have no clue whether I am accurate, but in the past 9 months I have got about 13% on my SIP.

3. What products have both of you invested in for retirement savings?
No products have been specifically earmarked for ‘retirement savings’ but apart from my equity mutual funds, I have a Provident Fund which is a debt product, but my contribution is compulsory. I have a PPF in which I have put Rs. 1000.

4. How much do you plan to save for retirement in a year (please give % break up for different options if possible).

I would like to earmark at least 10% of my net income for retirement – currently the earmarking is in the mind*! As time goes by and I need to withdraw for other goals, I will ensure that the money retained for retirement is sufficient for retirement. Currently all my mutual fund SIPs are in equities and my provident fund contribution is in debt instruments.

*This is the learning from Retire Rich: Invest Rs. 40 a day!

Thank you girl! At your age, I wish I was half as evolved as you are! God bless you…

PS: have seen her for one year….not sure whether she will do it for a few years…to be brutal. However as a friend I hope she does it…good for her!!

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many people try to help their children..and actually harm the kids. When a boy takes a car from his father in law, the chances are she will treat him like a driver..need i say anything more?

personally it is fine to help for education – or the basics like term and medical insurance, but not for luxuries…just read on…

http://www.lovingyourchild.com/2010/11/finance-kids-give-money-adult-children/

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7 money lessons to teach your kids

Tell your kids, ‘Money is the root cause of all good!’ Of course, the line is from Ayn Rand.

We are in a vacation – Winter vacation as it is called in India. But with all this exam, vacation, exam, unit test, one thing is clear. Nobody is teaching your little darlings anything about money. While our children’s teachers share responsibility for teaching them to read and write, they won’t do much to help our children develop basic financial literacy skills. Beyond simple addition and subtraction, there just isn’t enough time in the school day to do it all.

So what’s a caring parent to do?

Take your child’s money-management education into your own hands, of course. Here’s how. It’s important to remember how your kids think when it comes to money (or anything else). Most children are concrete thinkers who can demonstrate progressively organized and logical thought but have a limited ability to think abstractly. Preschool and elementary-aged kids will have trouble understanding abstract concepts like inflation, interest rates, and saving for a college education that is 12 years away.

However, when my 5 year old daughter tells me the following things, I realize that she understands money:

Daughter: Dad, I need money to buy a gift for Mom

Self: Why don’t you use what is in your piggy bank?

Daughter: Dad, coins do not buy anything, I need notes!

My wife and I shop separately, so when my wife was contemplating quitting her job, my daughter said, “Do not quit. Dad does not buy you anything. Keep your job”.

At five, she understands that bread costs Rs 17, a car Rs 8 lakh and a house Rs 40 lakh. This is only because of constantly talking with her about money – unemotionally and factually. That’s why, when I told her that we couldn’t buy the five feet tall teddy bear because we don’t have enough money, she was worried that we wouldn’t be able to buy bread. To her, ‘no money’ meant, quite literally, that our pockets were empty.

I should have said, ‘We choose not to spend money on that so we have enough money for other things we need to buy.’ Understanding the way your child thinks is the key to providing him or her with a quality education in money management.

Here are 7 ways to help your literal thinker learn about money:

1. Piggy bank:

Buy your preschooler, a piggy bank and give him or her a stack of coins to put in it. Ask your child to sort the coins in a variety of different ways – shiny versus dull, big versus little. Know that he or she won’t understand for some years that a rupee saved today can be better than a rupee saved when she is 30 years old, they should get a touch and feel of money. I make my daughter pay money at the shop so that she understands the difference between coins, a small note and a big note. Supervise carefully, though, since sometimes, they still like to test things in their mouths.

2. Pocket money

For older children, establish an allowance so he or she can begin to make independent money decisions. Some folks will advocate linking the allowance to certain chores; I prefer establishing the basic chores (e.g., making the bed, cleaning their own room, and setting the table) as something each person does because they are a part of a family and it is their job. Be very careful that they do not become too money minded and keep asking, “How much will I get for looking after granny when she is unwell?” However, giving your child ‘extra’ tasks (like washing your car) for which he or she can earn money can teach her the satisfaction that comes from working for a goal. Your child will also understand that the more work that’s done, the more money he or she earns – a valuable life lesson.

3. Value inculcation

One customer of mine has done a brilliant ‘value inculcation’ in his son. He gives his son 30 coins of Rs 5 each. The kid needs one coin every day at the recess. So, 22 of them are precious. He has only eight to spare every month. Now when the kid says he wants a new tennis racket or new tennis shoes, my friend quotes a price of say ‘12 coins’, it takes his son about three months to accumulate the same. And he treats each Rs 5 coin with far greater care than a 500 note.

4. Introduce financial jargon

Get your older children to understand words like saving, investing, donating, pension, financial goal setting – they will thank you in the future.

5. Bank account

Opening a savings account, touring a bank vault, using the rupee-counting machine, comparing prices, and paying for items and receiving change are a few everyday ways to learn about money. My daughter was so happy that she opened the bank cover – and quoted the “pin” number. What she was actually reading was the pin code on the cover! But that is a teaching opportunity for me!

6. Summer jobs

Encourage your child when he or she tries entrepreneurial ventures like buying crackers in the wholesale and selling in retail, baby-sitting for the neighbors, or starting a dog-walking service. There’s no substitute for learning on the job.

7. Lead by example

Last, but not least, be mindful of how you talk about money. Do you complain about bills, fret about money, and always use negative terms about finances? Don’t be surprised, then, if your kids feel negatively, too.

If you need some financial refreshing of your own, make full use of your this blog. I hope to fill it with right financial gyan – without forcing you to buy anything. Getting yourself on the right financial track is the best lesson of all for your kids. So, parents, remember that some lessons still start in the home. Managing money wisely is one of them.

The author, PV Subramanyam, is a financial domain trainer. He can be reached at pvsubramanyam@gmail.com

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Recently my father got a copy of a book for children about Money.  Here is what I learnt from that book and I thought it will be useful for all of us to know a little about Money. So here are some important concepts about money:

Saving:
Saving money is very important. We should save money because if one day suddenly we need money we will have it with us. If we just keep on spending all the money that we get and one day we need money we will not know what to do.
I am also saving all my pocket money because I might need it in future. I have kept it in a bank account and I get interest on that every year.

Tax:
As we all know that Government pays money for various things we should never spoil those things as Government takes money from our parents in the form of tax. All those people who get regular salary have to pay tax. When we buy a movie ticket half of the money that we pay goes to the government. This is called Entertainment tax.

Investing:
Investing makes our money grow. Just as a plant grows from a seed to a plant. When we keep our money in a savings bank we get interest but if we will invest our money in fixed deposits, shares, mutual funds, public provident funds, etc. our money will grow from a small amount to a big amount faster. Real money takes more time to grow whereas a plant grows within weeks.

Insurance:
Insurance protects you from spending a big amount on medical treatment, repairs, etc. Today if I am spending a small amount on a helmet, kneepad, arm-pads, etc. this will help me in being safe while skating. I will not have to spend a big amount on medical treatment. And if I fall ill the insurance company will pay the hospital bill. This way I  and my family are spending lesser money from our pockets.

Prize Money:
We should treat our prize money just like our pocket money, because that also we have earned by working hard. We should save that money and not waste it on unwanted things. A part of the money we should spend on something fun like ice-cream and the balance we should put in our piggy bank or the savings bank account.

Banking:
We keep our money in the bank so that it is safe. The bank gives us a passbook in which we can see how much money we have deposited and how much money we have withdrawn. For using our money the bank pays us interest – this is also added to our total amount. Last time I saw there was an additional Rs. 314 interest in my savings bank account.

Credit Card:

When we are in a shop and we do not have cash with us we can buy things by using our credit card. The shop-keeper will let us take the goods because he will get the payment from the bank which has given us the credit card. However we have to make the payment to the bank after a few days when the bank asks us to make the payment. If we do not make the payment before the due date, we will have to pay interest on the amount that is due.

—end of Mridula’s article——

comments from kids more welcome than from adults -subramanyam

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Orphan, Widow, Widower,…are all words which describe bereavement. Did you know that the founders of the English language have no word to describe the death of a child? Was it too cruel for them to think of a word to describe it?

Is this why I cannot find words to describe the loss of ‘Anand’ from the lives of Vimal and Vinay Salvi? Has the happiness gone out of her life, or has she lost a part of her future? I cannot even think of the grief of bereaved parents – for a mother a part of her has been ripped apart. For the father it is the loss of a friend apart from the loss of a kid.

What do you say to the parent who must have died a thousand deaths – in the last 14 days when her son was battling for life at Apollo Ahmedabad?

Tell her “May God give you strength” or ‘Things will be normal soon’  – to me all these words sound hollow. How to bring it to my lips when my heart does not believe it?

The plight of parents who have to pretend that they are alive is tough – but the pretense has to be kept up because they themselves are children of grandparents who are battling the loss of a grandchild. Oh My God, this feels so unfair.

Krishna at least you were around for Arjuna and Yudhishtra – Vimal and Vinay need you. On your Jhanmashtami you can at least come to them in some form and console them. Surely you are standing there helping them, please give them the strength to recognise your presence. In a weak movement they may not be able to recognise you. You were able to ask them “Are you crying for the body that was temporary, or rejoice for the soul which has gone to a different body”.

Other children cannot take the place of a child who has passed away. The vaccum will always be felt.

In a world where we live, we need to blame somebody – the motorcycle, the helmet, the footpath on which he hit his head, – without realising that these are just tools for Krishna to do what he wants to do. Does blaming help?

Krishna I am not even wondering whether you are reading my blog, I know you will be there for Vimala and Vinay, especially when you have taken away the Anand of their lives.

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He felt his life goals were very clear and he had achieved them, but his children were not fired enough. He had no clue what to do.

On probing I realised that his dreams too were a derivative of his childhood. He explained to me that his father (the children’s grandfather) would take him to meet relatives and cousins. Some of them had cars (in the 1960s and 1970s that was news!) and he had seen his father struggle to buy a house at age 49. So for Mr. A buying a house and driving a good car had become a very important GOAL. However if you rubbed a little you realised that this was just about being there – these are difficult to be called goals. You really need to stretch to call living as achieving goals .

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Here are some lessons which I wish somebody gives to all graduates. It does not matter whether you are a CA, MBA, a doctor, Engineer or a plain graduate. These lessons are the basics of finance which is nice to know and MUST to implement. Let us enumerate them:

1. Avoid credit cards: Well Warren Buffet (forget his recent behavior, he is still a genius) says this is the most important lesson which a college graduate should know. If you understand compounding you will realize what 3.25% p.m (compounded monthly) can do to your portfolio. If somebody was paying you that on your deposit you would be a millionaire several times over!

2. Learn self -control: What ever you need today see if you can count to 25. If you can hold on to a desire for 25 days and then buy a lot of harsh, impulse purchases can be avoided. Of course if your parents taught you self control that is great!

3. Take to some sport: Company deadlines are all fine..but do not miss out on the fun, it is not worth it. Continue playing with the kids of your building – they will provide more energy than your friends. The energy of a 14 year old is higher than the energy of a 24 year old! Playing some ad-hoc sport and some organized sport both have their advantages.

4. Take charge of your personal finance: Let not your parents, elder brother or even worse a financial adviser not tell you ‘It is too complicated for you to understand’. Get the books to read, understand, and be responsible for your financial welfare.

5. Share the Economic responsibility with your parents: It means learning how to run the house within a budget. Learn if you do not already know how to do it and your parents have not taught it to you.

6. Learn compounding – it will inspire you to invest for the longer term. In the year 2065 or in the year 2070 YOU TOO WILL RETIRE! Start preparing for it. Sign up for a nice equity mutual fund with a clear large cap mandate. Do not buy a pension plan from a life insurance company.

7. Create an Emergency fund: ‘Just in case’ if something goes wrong – an accident, loss of job, replacing a laptop – you do not know from where the emergency could come. So be prepared for it. Of course it you are staying with your parent and he has an emergency fund …you may be better off, but still it is better to create a fund for your own self.

8. Take trouble to understand your C T C (cost to the company) – and your monthly statement. See if you need to make investments to save tax. If the answer is yes start NOW. Today, not tomorrow.

9. Treat your employment as a business: Your boss pays you a salary out of the profits that you make for him (i.e. the income you earned for him MINUS the expenses that you incurred – including salary paid to YOU) adjusted for the risk that he takes. If you brought no revenue learn to be happy with what you are getting.

10. Look after your health: Do everything in moderation – eating, freaking out, drinking, scullying, having fun. All these have their place under the sun, but your health cannot be ignored. Damage done now will haunt you for life. Be careful and take care.

11. Look after your wealth (and your parent’s wealth): If your parents / siblings depend on your income (or even if they do not) see whether you need medical, auto, life insurance – it is important to protect your wealth.

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I was quite impressed – first of all to get a 9 year old to read a book on Money is not really easy, but she finished in a day and here is what she thinks about Saving (not a word changed from what she wrote, Her name is Mridula and studies in Apeejay School, Nerul, class 4:

Saving:

Saving money is very important. We should save money because if one day suddenly we need money we will have it with us. If we just keep on spending all the money that we get and one day we need money we will not know what to do.

I am also saving all my pocket money because I might need it in future. I have kept it in a bank account and I get interest on that every year.

Tax:

As we all know that Government pays money for various things we should never spoil those things as Government takes money from our parents in the form of tax. All those people who get regular salary have to pay tax. When we buy a movie ticket half of the money that we pay goes to the government. This is called Entertainment tax.

Investing:

Investing makes our money grow. Just as a plant grows from a seed to a plant. When we keep our money in a savings bank we get interest but if we will invest our  money in fixed deposits, shares, mutual funds, public provident funds, etc. our money will grow from a small amount to a big amount faster. Real money takes more time to grow whereas a plant grows within weeks.

Insurance:

Insurance protects you from spending a big amount on medical treatment, repairs, etc. Today if Iam spending a small amount on a helmet, kneepad, armpads, etc. this will help me in being safe while skating. I will not have to spend a big amount on medical treatment. And if I fall ill the insurance company will pay the hospital bill. This way me and my family are spending lesser money from our pockets.

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