Hrishi K: Hello and welcome to NSE Presents: Invest – O- Cast (An exclusive investor podcast) Powered by MoneyControl. My name is Hrishi K I am your host on this podcast and it is all about getting your money to make better investments for you in the new financial year.
You know the other day I was reading this news article on how children have been spending thousands of dollars on games in the US without their parents having a clue…. until that fat credit card bill came home. Parents were shocked and rushed to stop their children from playing games but the damage was done. Children just didn’t understand the concept of money. They thought money was something that came from a hole in the wall-ATM or one of mommy or daddy’s shiny cards.
And then it got me thinking, with India turning into a very consumer-oriented economy, it’s just a matter of time before children here go down the same route. Every day, the front page of the newspapers are plastered with some mega sale on an e-commerce website, a celebrity is endorsing something or the other, and most advertising is geared towards children. The number of teenagers and pre-teens in coffee-shops is on the rise. How are these children getting so much money to spend? I decided to look for answers.
Which is why in today’s episode of Invest-O-Cast, we are going to talk about introducing the concept of finance to our children, educating them on spending and saving, and teaching them the value of money.
National Stock Exchange (NSE) with the help of Invest – O- Cast (An exclusive investor podcast) Powered by MoneyControl is committed to break the limitations of geographical boundaries and reach investors across the country. In today’s episode we talk about, teaching our kids the importance of finances. We will look at children from different age groups and how can we help them understand that money doesn’t grow on trees.
Our guest today is Priti Rathi Gupta- Founder LXME, MD and Promoter of Anand Rathi Group. She is a leading woman entrepreneur in the financial space. She holds a degree from Harvard Business School and has worked for over two decades in the world of finance. A mother herself, she knows a thing or two about making sure children understand the importance of money and the importance of finance.
Welcome to the show Priti. It’s a pleasure to host you.
Priti Rathi Gupta: Thank you, it’s a pleasure being here.
Hrishi K: Let’s start by you telling our listeners about our journey so far.
Priti Rathi Gupta: Well blessed to be born in a great family. Not born so rich, married early, figured out my finances and made my own money and some of my own dreams. Now rich in experience and the only goal in life is to make some wonderful films from the money that I earned as well as help women learn the art of investing.
Hrishi K: And my dad have really enjoyed both the film you co-produced which is ‘Waiting’ and ‘Karwaan’, so looking forward for more on that front. Let’s drive straight into it. Now money is a taboo topic in most homes, adults believe that children shouldn’t become money minded from a young age, you know they talk about value systems and stuff like that and we same adults expects them to start saving smartly when they start working. I would like you to give our listener she a little bit of background on why it’s important to talk to children about money at a very young age Priti?
Priti Rathi Gupta: Ok, so managing money is a life skill and like any other life skill you have to make your children start imbibing in right from you knows the minute they understand, see their first few letters, understand the first few things in life. So therefore it is very very essential and I am going to just make a point here by saying that need to emphatically treat as much to your girls as much as you would to the boys. So I think just like any other life skill like I said you need to teach it, more importantly because we live in the age of consumerism where there is a lot to spend, lot to spend on and there is you know that easy temptation so therefore just to learn that art of how to manage your money reasonably well is something that needs to start at an early age when kids are impressionable and are able to absorb a lot.
Hrishi K: That’s really insightful. Thanks a lot for that. You are listening to NSE Presents : Invest – O- Cast (An exclusive investor podcast) Powered by MoneyControl an initiative that is all about helping people learn about their finances on the go… Priti let’s go into various age brackets, can you now break down the concept of finances for really young kids and by only young I know I mean between 3-6 years old?
Priti Rathi Gupta: Well I think that’s the age that you start making them get familiar with money, understanding that money is a store of value. I remember that when my children were young I would play with them the game about coins and rupees and I think a lot of parents who want their children to learn about money do that as well, so you give them a piggy bank ideally if it is a transparent piggy bank even better so that they can see that money adding up and you know at typically intermittent, regular intermittent or intervals say on a Sunday you would sit down with them and count that money and replace that with a note so add up your one one rupee coins to a 10 rupee note and give them the note so that it makes them look like now I have earned something from all my savings. I think the idea is to really understand the concept of money adding up and then you actually take them out to shop maybe with the money that have been saved to also then bring home the fact that you spend from the money you save.
Hrishi K: Wonderful, you know I remember as a kid, as a really small kid getting a little bit of a sum when I went to the movie with my friends, with the rare occasion that we did go to the movies and I always asked for a Hisaab or I was asked for you know what was the break up when I came back and that has really stood me in a good steps. At that time you always question your parents but in retrospect you do realize the value of that. Let’s move on to the 7-12 age group. What really is something that parents can impart to this particular age?
Priti Rathi Gupta: Well I think the first and foremost thing is that we must discuss our money decisions around our children. Typically what would happen earlier would be that parents would say oh! Money let’s talk, let’s keep it behind the shut doors and talk about it but discuss money decisions with children, include them in that conversation so that they are very very alert about how money decisions are made. There is an interesting activity that you can do for the really younger kids may be a 7 or 8 year old children it’s called a 3 jar activity. Where you have 3 jars and you name them each one is name ‘Spend’ and the other ‘Save’ and the third ‘Invest’ and you give them a certain amount of money and ask them to make their choice of where they would put money into which jars and each of those jars so for example it is a ’Save’ jar and they see the money adding up but it is all saved in a jar, if it is in ‘Spend’ then they can make your decision to spend and if it is ‘Invest’ then you make sure that you add a certain reasonable amount of interest to that money. So they actually understand the difference between just saving and investing and you will realize I have seen a lot of children who then consciously say ok may be from the ‘Spend’ jar I can put a little bit into ‘Save’ and a little bit into ‘Invest’ and I think that is where the early calibrated decisions of how much to save, how much to spend and how much to invest comes in. Like you gave the example, send them to the super market to do some chores and say come back with a Hisaab so you understand the whole concept of spending balance etc. One of the critical things that one must start talking to children about is the banking system. I mean for children I don’t think they need to see money coming out from an ATM and thinking it is coming or you know that it is magic money coming out of the walls. So teach them what banking is about, where does your money go, what does ‘Interest’ mean and what does ‘Compounding’ mean and I think you can do that by a way of a lot of ready available calculators, games that are available on the phones model calculators that they can understand this by. So think those are the few things that you can do with 7-12 years old.
Hrishi K: Let’s move to the problem years is a lot parents of teenagers will testify it’s increasingly frustrating for them to handle teen but you know, honestly Priti my heart reaches out to the teenagers of today because there is so much of peer pressure. I mean how is a teenager is not expected to feel jealous when he sees his or her peers playing with gadgets, with all the cool stuffs but as parents I guess responsibility is trying to teach them the value of money. So dealing with teenagers and teaching them the importance of money.
Priti Rathi Gupta: Well I think teenage years are the years where you cannot really instruct them. I think you have to guide them to make the logical decisions. One of the key things or key concepts that a teenager should be able to understand is the difference between ‘needs’ and ‘wants’ and I think that is where you understand that is this something I ‘need’ to spend on or is it something that I ‘wish’ I to spend on. So the way you would actually make them understand the whole idea of needs, the difference between needs and wants is actually explaining certain other necessity needs in life as in have you created an emergency fund because that holds you in a good stead all your life. Its post that, that you would look at saying can I indulge in luxuries. Digital calculation to show the future value of money because we have a very smart generation now and if you tell them the 500 rupees sorry… 500 doesn’t even sound logical but a 50 thousand that you spend on a phone today could be worth 5 lakhs in the next 5 years. I think these are the idea you can feed to them, help them to use, ask them to use a budgeting tool again a lot of online budgeting tool available. Link dreams, I think it maybe good idea to sit down with them and say ok what are your dreams and if your dream is to study in a university abroad then you link it to money goals and say ok if I had to, we had to begin now this is how we would go there. Help them open a bank account, give them a debit card. A lot of people say you should not give them credit cards etc. but they are going to live in digital age and digital money so therefore I think it’s really not… it would be imprudent not to make them learn these, you know how credit cards learn etc. So give them a debit card, let them look to the card statements, ask them to book online tickets, cabs because you also need to understand the whole bit about the security of the digital payments so the OTP, PIN, CVV because that is… you know the security risk there is very much important. But I think beyond all of that like I said you cannot instruct children you have to guide them to the right decision, it would be wonderful to actually help them pay more attention, focus on maybe future aspiration, making a change to the world or to bring home the difference between the short lift joy of material things VS long term plan of success. So that then a certain sense of prudent sets in, in terms of spending of money.
Hrishi K: You know it’s really weird our schools teach us so much about Algebra, Geometry, Geography which is absolutely nothing on how to handle money. So many adults I know had absolutely no idea what to do with their money when they started their first jobs. And we are hoping to change that through this series in particularly hoping to build this particular new generation of kids who will go up knowing more about money than our generation ever did. So just some parting thought from you.
Priti Rathi Gupta: Yes, so I think you know like I have always said managing your money and your financial planning is a life skill that one needs to learn early on, while school will probably get there at some point I think kids learn from their parents and therefore it is very important. I remember I used to tell my son who was great at excel when he was 14 years old that you know I am making a financial plan can you help me pu