Every financial article, planner or adviser will tell you that you should take term life insurance to protect your family. This amount of money will protect your family from financial troubles if you were to die before completing your financial responsibilities.
There is no doubt that term life insurance is a must. Far more important is to teach your children the value of money, and the do’s and don’ts’ of money. Nobody else in the world is going to teach them as honestly and sincerely as you can, will or should. Financial literacy can mean different things for different people, but knowing how much you earn, and your relationship with money is very important.
Children should know how money goes into the bank account- they know it comes out of the ATM.
Communicate, and do projects together: Let your children do the ticket booking and hotel short-listing when you go on a vacation. Let them short-list the things to buy - from household goods to even groceries. Teach them the usage of the credit card and the debit card. They feel empowered in the beginning, and later on you can delegate easily. From the age of 12, my daughter has been booking tickets for our travel.
Get your children to pay the monthly utility bills - this is a very useful task to learn.
Involve your children in your investment decision - knowing why a mutual fund has been chosen, for which goal etc. This will force you to be focused on your goal-based investing, and you will no longer do unfocused investing - both parent and child benefit!
Teaching a child about why you do charity - and to whom you do it is also very useful. Young children should start learning about charity by starting to give away their old toys, dresses, etc. Once they start earning, encourage them to choose some good charitable organisation to engage with.
Children will see the benefit of your organised living - making a budget, recording the expenses, planning for the bigger goals, etc. They will carry some of these learnings into their education too. The advantages of organising their education starting to study from day 1, planning for studying etc. is just taking learning from one field to another.
Teach them to read labels - NOBODY else will. I mean food labels, and the labels on financial products. They should understand that when a product says “no sugar” it could be loaded with carbohydrates, which will eventually get converted to sugar. It is not so intuitive. You may have to learn to be able to teach good for the family.
Teach them the advantages of patience. Put money into their savings account and let them withdraw with a debit card. Tell them that you will double the balance left at the end of the month - and move it into a mutual fund. This is a huge incentive to save instead of spending. It also teaches them to prioritize and WAIT for the end of the month to spend it. Imagine if they had Rs 1,000, you will contribute another Rs 1,000 and shift it to a mutual fund. They should be allowed to withdraw the mutual fund only when it is eligible to withdraw without load. This forces them to keep it there for another one year!
There are many hacks that you can use to teach your children MONEY! These are just some of the examples that I have tried. I am sure all of you would have your own hacks — just add these to your armoury!
PV subramanyam writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’