Role of the parents
As with other aspects of life, the parent's role goes beyond the steps outlined above.
Lead by example. "Children learn from examples their parents set. If a child sees his parents making a household budget and following it, he learns the importance of doing so. On the other hand, if the parents are seen spending money thoughtlessly, no amount of advice will help the child appreciate the importance of managing money," says Sardesai.
Wisdom by choice. A teenager can get swayed by get-rich-quick dreams. It's important to guide him away from wild schemes and towards prudence. "Inculcate long-term approaches towards investments and wealth creation. Tell him about investments you made 20 years ago and how they have benefited you over the years," says Sardesai.
"As long as the child is choosing a well-known equity fund or a blue-chip stock, discuss the matter with him but allow him to take the final decision. If, however, you notice him speculating on a daily basis, curb the habit immediately as it may be difficult to correct later," he adds.
Allow him to make mistakes. This is crucial. Remember that even if your child loses all his money in a wrong investment, it doesn't affect your retirement plans. It's the bicycle lesson all over again, says Mashruwala. "If he loses money, it will hurt him and he'll think twice before making a similar decision again," he says. "Shielding him from losses is unfair." Every mistake is acceptable as long as the child learns from it.
Keep a check. Allowing your children to invest and multiply their money comes with a caveat. Mashruwala explains, "If they are earning a large income, you have to introduce broad guidelines on what they can and cannot do with their money. Ensure that they do not gamble or borrow from friends to speculate on the market, or get involved in fraud. It is mandatory that you keep track of their investments. If you do not have the knowledge or cannot spare the time, it's better not to go down that path."
If you decide to introduce your child to investments, encourage him to build his own contacts with your brokers and other financial advisers. "This creates automatic checks on the child's financial habits," says Mashruwala. IMM has a finance programme called Major to Minor (M2M) for children of different age groups.
"Parents should be mentors, but they should reduce their roles as swiftly and smoothly as they can. Let kids mature quicker and take their own decisions. Which parent will not like that?" says Pachisia.
There are many things that money can buy. Teach your child how to invest and he will never miss out on those.
Image: A girl dressed as Rani Laxmibai of Jhansi | Photograph: Sam Panthaky/AFP/Getty Images
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