Gaurav Mashruwala On Teaching Kids About Money

Following is an excerpt from yesterday’s TOI.

A question that is frequently asked by the  parents of young  children is: How do we teach a child about the value of  money and which is the right age to discuss the subject. The standard answer is that irrespective of their age, children today are already exposed to money-all the time, through media, through daily transactions with goods and services. Money is not just a currency of exchange, but an important factor underlying people’s lives, decisions, conversations and choices. Therefore, the child understands the power of money, says financial planner Gaurav Mashruwala. She or he starts believing that money can buy most things, especially given the onslaught of advertising. Most parents believe that exposure to money means discussing banking, investment, stocks, etc. However, money is about so much more-discipline, gratification, patience and value. In reality, there are four aspects of money-income, expenses, assets (investments) and liabilities (borrowing), says Mashruwala. A child needs to be exposed to all these aspects in a systematic manner. The right age to expose a child to money management is the day the child learns to spend money. “The day you give your child currency to purchase a toy or a  chocolate, ask him or her to make a note of it. Their budget writing habit should begin from there.” Mashruwala says he has given his daughter a ‘chocolate bank’ . This is like a piggy bank. Every time she gets a chocolate, it has to be deposited in this bank. She can eat chocolates twice a week from the bank. “She observes chocolates piling up when deposited and reducing in number when withdrawn . This will help in teaching her the concept of fund inflow and outflow in the future . Thirdly she has two piggy banks. In one bank she deposits currency notes, which she receives from elders on festivals and other auspicious occasions. This piggy bank is in the shape of a bus. The story that has been told to her is that the bus is going to the bank. Therefore, all currency notes in her bus piggy bank goes to her bank account. By the way she had her first bank account when she was 12 days old. Another piggy bank is a transparent glass bottle into which she deposits her coins. Next to the jar is a picture of an object-usually a toy-that she wants to purchase with her savings.” This, says Mashruwala, is to help her set financial goals. The piggy bank is transparent, and she sees the pile of coins growing when she deposits it and the pile reducing when she takes it out. Since his daughter was born on December 18, on the 18th of every month, she gets to purchase a gift of her choice. There is no other buying allowed  the rest of the month. This brings in discipline . “If she wants a larger gift then she has to miss gifts for onetwo months-so that she understands delayed gratification. She also observes me and my wife write our daily expenses. All kids want to imitate their parents. Remember the cardinal rule: Practise what you preach. If you are not fiscally disciplined, don’t expect your kids to be.”

This article got me googling for more on what Gaurav Mashruwala,the famous financial planner, had to say on teaching kids about money.Here is what I found:http://www.gauravmashruwala.com/pdf/What%20is%20the%20right%20way%20to%20expose%20a%20child%20to%20money%20-%20moneycontrol%20-%2024%20June%202009.pdf .And if you want a link to the RBI cartoons he speaks about, here is a link to them: http://www.rbi.org.in/commonman/English/scripts/basicbanking.aspx