Eight year-old Aditya does not like the fact that his house in Mumbai is smaller than the one his parents have in Pune. He also cannot understand why the family lives on rent in Mumbai instead of buying a house, as in Pune. After all, his father works from 'morning to night', and so they should be able to afford a house, he reasons. He even suggests his mother take up a job.
Poonam Shah, mother of eight-year old Soumin, is worried her son does not realise the difference between a toy that costs Rs 1,000 and one that costs Rs 500. "Soumin has always travelled by car. He has never travelled by bus or train. Even when we go by cab, it is AC cab. I want him to realise that not everything in life comes easily," Shah says. To make her child understand the worth of money, Shah allows Soumin to buy new toys only once in six months. Toys that are battery-operated and remote-controlled are generally forbidden. If Soumin has to have a battery-operated toy, it has to be a rechargeable battery.
Such concerns are common among parents today, given the lifestyle children are exposed to, especially those in metro cities. Often with both parents working, money is easy to come by, as parents tend to use gifts to make up for their absence at home.
"Parents should be strong and not give in to unreasonable demands. This way children learn to equate money with love," says a counsellor at Nirmala Niketan College of Social Work.
To teach Aditya the importance of saving, his mother opened a bank account for him, in which she deposited money he got as gift from relatives. Though the cheque book is in Aditya's name, his mother is the signatory for the account. She shows him the balance in the account online and has explained how interest gets credited into Aditya's account.
Recently, Aditya went on a field trip to an orphanage from his school, and donated Rs 1,000 from his account, using his cheque book. His mother explained to him how money got debited from his account when the cheque was cleared. Next month, Aditya remembered the date when the interest would be credited to his account, and insisted on checking the statement on that day.
"The practice has helped create an awareness, and I hope when I start giving him pocket money, he will be careful with it. Even today, when he asks for money on certain days to buy snacks from his school canteen, I explain that his money in the account will be cut that much. He weighs the pros and cons, though he eventually decides to eat chicken noodles from the canteen," Aditya's father Anil says.
As an experiment, parents can volunteer with non-governmental organisations that work with street children, for instance, and take their children with them. This will show children that not everyone lives in luxury, says the counsellor.
Depending on the age of the child, parents should also introduce the concept of pocket money.
"Giving children rewards for achieving targets and encouraging them to save money in a piggy back will teach them earning money is not easy," the counsellor adds.
According to Amar Pandit, Founder and CEO of My Financial Advisor, it is best to start teaching children the basics of saving, budgeting and prudent spending right from the age of four or five years. "While most parents teach children about putting money in piggy banks, very few go beyond that and open bank accounts for the child. Children today know much more than we knew when we were their age. However, they feel parents have an unlimited supply of money, and look for instant gratification of their demands. This is a common problem across many households," he says.
"Children can be taught financial concepts through day-to-day activities, stories and games. For example, parents can use board games that combine sports like cricket with personal finance concepts. Such games are available online," Pandit says.
The concept of saving, for example, can be taught by using the example of a money plant, and showing the child how money would multiply when invested. Parents should involve children while making the monthly grocery budget, or while shopping for provisions. Children can be encouraged to look for cheaper brands, which can help reduce the bill.
The concept of pocket money helps children understand budgeting, cash-flow management and record keeping. To introduce the concept of work-and-pay, parents should encourage their children to help them with some project or do some research and reward them in turn. However, parents must remember never to introduce rewards for things children are expected to do, such as keeping the room clean or studying well, Pandit says.
"Kids learn from what they see around them. So, parents have to do themselves what they want their children to follow," he adds.