Mukul Kulkarni, principal architect, White Designs, Nagpur-based interior and product design firm, was in his 40s when he first got his financial plan constructed. A latecomer on the planning platform himself, he understood how he could have gained had he embarked on the road earlier. So when his planner, Ranjit Dani, a partner with Nagpur-based financial planning firm Think Consultants, stressed on the need to start early, while showing his willingness to talk to Kulkarni’s 22-year-old son Kopal, the architect saw the point. So started Kopal’s initiation into a planned money life.
“When my son (now 25) goes for his postgraduation this year, he would know exactly how much money he will need, how much I had set aside for him and where it will come from,” says Kulkarni. Kopal will even get a say when Kulkarni finalizes his education loan for a course in design.
It is seen that children with parents in a financial plan understand the basics of money management and are able to put their money life in order than those with parents who blunder around with their money.
On the right track: Mithila’s parents, Mrinalini and Arun Katiyar, have a financial plan and encourage their daughter to save regularly. Hemant Mishra / Mint
Says Surya Bhatia, principal consultant, Asset Managers, a financial planning firm: “We try to take kids who come for sessions with their parents under our wings and teach them how to save for small things and, thus, the benefits of savings. So, when they grow up, they don’t have to be taught to save. This is always a great start.”
An increasing number of parents are seeing the collateral benefit of working with a financial planner: Their kids are getting money-smart simply by watching what their parents do.
Planners weigh in
Planners also like to work extra hard to work with the kids. Gaurav Mashruwala, father of an eight-year-old daughter and a financial planner himself, encourages his clients to make their children money wise. And he practises what he says. His eight-year-old daughter is taught about savings in a language she will understand. She is allowed to eat chocolates only twice in a week and not whenever she pleases. They have a transparent jar, in which goes every chocolate she gets. Every time, the jar brims with chocolates, she gets a book, which is her passion.
Says Mashruwala: “Kids already have notions about banks and money. When I ask kids what does a bank mean to them I get answers as diverse as ‘a place where amma keeps her jewellery, a place where dad gets his money from, they gave us a house, and so on’. So, why not convert these vague notions into concrete ideas?”
You may or may not agree with this particular method of delayed gratification, but the idea is to find your own way to begin as early as possible with the kids. Mashruwala, in fact, prefers transparent piggy banks to his clients so that children can see the level of the coins rising. He encourages parents of older kids to give them pocket money and allow them to manage their own expenses from it. “This way they know exactly how much things cost and can also learn to budget and prioritize their purchases,” says Mashruwala.
For children in the age group of 16-17 years, Dani suggests that parents give extra pocket money for six to eight months and see how they manage the extra amount. At 18, Dani helps clients’ kids in acquiring something that most of their friends would not have: a permanent account number.
Dealing it smartly
Dealing with children, especially teenagers, is not easy. One needs to get into their kids’ skins to understand what would really work with them.
“When I talk to my clients’ kids, I ensure I come down to their level, think like them and most importantly be their friend and talk to them in a very informal and unstructured manner,” says Dani.
If the goals they are given are too long term, there is the risk of losing interest. They first need to see the benefits accruing in the near term and get on to long-term goals later.
So, both Bhatia and Dani, usually asks them to save for something that they can get in a year or two, such as a camera or a new cellphone.
“It is also very essential to link this monetary education to children’s dreams and passions,” says Dani.
While discussing her spending patterns with her planner Mashruwala, Rima Mukherjee, Mumbai-based doctor happened to mention that her son was becoming a stubborn shopper. “Every shop we walked in, he would demand something. It became a vicious circle because when I gave in to his demand, my frame of mind became negative, and if I didn’t, then he did,” says Mukherjee.
Mashruwala suggested she give her 13-year-old son, Neell, a monthly budget and it worked wonders. “In the beginning, he exceeded the limit. But gentle reminders that he may not get anything next month worked. Now he prefers postponing purchases to exceeding the budget,” says Mukherjee.
Kids play along
For children, the exercise gives them a sense of empowerment in terms of taking their own money decisions and being in control. And, of course, the lessons remain with them for life, saving becomes a habit and there is exposure to the magic of compounding early on.
Neell seems to have learnt how to manoeuvre his savings. “I overshot the limit to buy the (toy) car once, but it was actually a saving for me. I played with it for six months, so I saved the next four months’ money,” Neell says. He has also learnt to budget, prioritize and plan. He adds: “It’s very simple. Now I only buy what I need immediately. If the need can be pushed away, then I push the purchase, too.” He plans to save for a few months for his next target—a game DVD.
Aveek, who studies in Singapore now, got the money lesson from his father, Arun Katiyar, early on. Now he manages his leisure expenses with his own money in Singapore. “He had been saving up for five years,” says his proud father.
Katiyar’s daughter, 14-year-old Mithila, began investing the money she earned from her hobby. In the process, she learnt how to track funds and even planned a family holiday to the Maldives. Katiyar’s both children now have their own accounts with Lovaii Navlakhi, managing director and chief financial planner, International Money Matters Pvt. Ltd.
But Mithila believes she has learnt a lot more than just the value of money. “I have also learnt to value my belongings more. Earlier, I just bought what I wanted, now I buy what I really need,” says Mithila.
So, have you initiated your kid yet?