Shilpi Johri, certified financial planner and founder of Arthashastra Consulting, found herself repeating the mistake that her parents had made—not discussing money matters in front of children to not stress them out—when her son Abhinav was about 12. She quickly changed tack and started with opening a basic savings bank account for him and introducing the concept of goal-based saving to him.
Like most people, she had her first brush with the idea of financial planning only when she started earning. “I had only heard my parents talking about either making a fixed deposit or buying property, since those two were the only known ways of investing at the time. Insurance was limited to buying two or three LIC policies without bothering about the actual sum assured," she said. She didn’t want Abhinav to figure out how to handle his money when he started earning, and decided to start early.
Shilpi taught Abhinav, now 15, the basics of how the banking system works to give him an idea about how money is channelised in the real world. “Teaching kids basic concepts can help them be clear about their requirements and help them prioritise in the future," she said.
Read: How should you plan for your child’s future
Shilpi believes it taught her son to be patient and wait for his savings to match desired goals. “In due course, kids also learn that sometimes your means can be limited and they may need to let go some of their demands," she said.
After the basics, she went on to educate Abhinav about the concepts of inflation and compound interest, so that he would be aware of how much money he would need for his eventual needs and goals.
Shilpi’s efforts have borne fruit. “When I see Abhinav researching about the cost whenever he plans to buy something and discussing with us how he plans to fund it from his pocket money or by taking a loan from us, I feel he is getting familiar with money concepts," she said.
Read: Treading the saving path early on
Abhinav has also learnt to carry out his own version of “cost-benefit analysis" and to sometimes decide against buying certain things if it doesn’t work out to be favourable.
“Since my parents don’t give in easily, I always do a complete analysis of why I need to buy something and how am I planning to use it before I ask for anything," said Abhinav. He has learnt more through the two books his mother gave him: The Cartoon Introduction to Economics (volumes 1 and 2). They explained the basics of microeconomics and macroeconomics, respectively. The first book describes how individuals take decisions and the second explains interest rates and productivity. “The two books gave me a very good idea of how to relate to real world financial issues," he said.
While books are one way to introduce children to money concepts, a little handholding by parents always helps.