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Teaching kids financial responsibility: Starting with a savings account
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Have you ever thought that school did not teach you some very real-life important things such as stress management, money management, and taxation? Things that have a significant impact on different aspects of your health – mental, financial, and physical. It’s understandable that you wouldn’t want the same for your children, that you would want to supplement their school education with other crucial skills and knowledge, with financial responsibility being one of them.
So, how can you do that? When it comes to money, the most effective way to teach your children to manage it well is to first give them money. For this, the first and most essential step is to open a junior bank account or a minors’ savings account for them. Opening a savings account like Kotak’s Junior Savings Account, which is a bank account for minors, for your children is a great first step to introduce them to the basics of money management and financial responsibility. And here’s how you can do that.
1. Give them a monthly allowance
Depending on your child’s age, you can credit a certain amount of allowance to their savings bank account at the start of every month, for which they will be responsible. If your child is in middle school or high school, they could use this money to cover their expenses such as commuting, going to cafes with friends, and buying clothes, books, games, etc. This will help them understand that they need to budget and allocate money for different wants and needs and make it last the entire month.
2. Get them a debit card and set up netbanking
In today’s digital age, it is important that your child understands how mobile and netbanking work and the safe way to go about banking transactions. Kotak’s Junior Savings Account comes with a personalised debit card so you can teach your child about the secure way to go about ATM withdrawals, shopping online and offline, and basic data security
3. Introduce the concept of saving and compounding
Kotak’s Junior Savings Account comes with an interest rate of 4% on the account balance. You can use this to introduce the concept of saving and compounding to your children and show them how money can grow if used strategically. You could also teach them about fixed deposits and how investing money can mean more money in the long term. This can help inculcate the habit of saving and investing in your children and allow them to be financially responsible from an early age.
4. Explain the difference between needs and wants
An important financial lesson for every individual, children and adults, to learn is the difference between needs and wants. If you teach this to your children at an early age, when they start working and earning an income, they will be better placed to manage their finances and have good money habits in place. By opening a savings account for your children and helping them budget, you can also teach them to stay away from impulsive buying, having the patience to save for big-ticket items, and living within their means.
Final words
If your children are under the age of 18, you should make sure to open a children's bank account for them at the earliest. Financial responsibility and money management are some of the most helpful skills that you can imbibe in your children that will help them throughout their life. And the features of Kotak’s Junior Savings Account will help you do this in an effective and easy manner.
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