Initiation into investment
As a child, you might have been told that money matters were "adult affairs" and it wasn't proper for kids to ask the price of this and the cost of that. With finances playing an increasingly important role in middle-class families, however, it is short-sighted to keep the children away from financial decisions.
"Let children be present while you are taking a call on investing in stocks and securities, real estate and gold and talk them through the process," says Sharma.
"Encourage them to ask questions and be part of the decision," adds Veer Sardesai, chief executive of Sardesai Finance, a Pune-based financial planning company.
Gradually introduce the child to the concept of compounding and its advantage, the various asset classes, taxation and the risk-return idea and, eventually, encourage him to start his own investments. He can invest some of his own money and you can add an equal amount.
Fixed deposits, mutual funds and the Public Provident Fund are good choices at this stage. "Tell him to choose the investment option.
Ask him to explain the basis for his choice," suggests Sharma.
Vaibhav, for instance, invested the Rs 5,000 he got as gifts over eight years in ICICI Prudential Infrastructure Fund. Now, he regularly keeps a tab on its NAV.
"I don't understand individual stocks, but I do know India needs a lot of infrastructure and I'm seeing it coming up around me. So I invested in an infrastructure mutual fund and my father also approved," he says.
Mithila Katiyar, 12, has been modelling since 2001. In June 2006, she made her first investment in mutual funds, clubbing together her professional earnings and a gift from a grandmother. Now with assets of more than Rs 250,000, she plans to sponsor at least part of her college education and take her family for a holiday in Lakshadweep.
Keep the child motivated with goals: if he wants a gaming console, let him plan for and work towards that.
Image: Eight year old Vidhi Khandelwal skates along a road near Patan, some 120kms north of Ahmedabad | Photograph: Sam Panthaky/AFP/Getty Images
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