Balakarthiga

Your finanacial advisor

MAKING YOUR CHILDREN FINANCIALLY INTELLIGENT


Good habits start early.

The Venn diagram of You, Your Kids and Your Money is one circle. It’s not only essential that you should consider teaching your kids about money, but financial experts advice that YOU MUST!

Some of you might be wondering – Why?

Well the simple answer is this: If you don’t teach your kids about money, who will?

You might say the schools will, but the sad truth about our education system shows otherwise. Yes, the schools will teach your kids will about Trigonometry, The Tropical Rain Forests and about Wordsworth and Tennyson, but they will not teach them the art and science of money management.

It is completely in your hands whether your kids are going to be managing or damaging their financial resources.

What’s more, how you manage your money is the most important influence on how your child will deal with it as an adult. Most children grow up to into adults who cannot save, spend or budget, because their parents failed to impart essential financial knowledge down to them.      

We know that as a parent you might have talked to them already about savings, but we’ve pooled in some other important principles you need to cover. So, here are certain essential dynamics of finance that you need to teach your children:

Delayed Gratification: Teaching your kids that they might have to wait to buy something they want should be the first financial management lesson you teach.

This lesson should be taught as early as 3 to 5 years of age and you can never start too early, because patience is a trait that gets harder to nurture as one grows up. So, the earlier you start, the better!

This will teach them patience, saving for a goal, and rethinking on their expenses carefully. It ensures that your children do not grow up to be impulsive, emotional buyers, and will be smart, intelligent consumers who prioritize their needs and wants. 

However, make sure that you do not set a goal that’s too far! Making them save for six months, for an expensive toy will frustrate them easily, and they will begin developing negative thoughts about saving.

Invisible Money: Money can be a very complicated concept for a child to wrap around his or her head – especially in this fast growing digital world. As a parent, you need to understand and acknowledge all the difficulties that your child might have.

Think about it – when you were young, money was a much, much simpler concept. But today, with credit cards, Internet banking and online shopping, children don’t actually get to see us buying products and services with actual cash of notes and coins anymore!

So, it is more important that you talk to your kids about this non-existent ‘invisible’ money – and make it existent. And it is also essential that you choose the right place and time to talk about this.

Some places that you can effectively do this are: At the ATM, while you’re shopping at the Supermarket and paying with your card, when you’re paying bills or when you buy them a book from Flipkart!

Budgeting: From a financial point of view, it cannot be emphasised enough how important it is to involve your children when you are doing a budget. This is one of the primary ways you can talk to your children about money, and costs and spending.

Explain to them how much money the family has, what you and your spouse earn, and how much the family spends every week. Give them an insight about how much every day products and services such as food, petrol, electricity, and movie tickets etc. cost.

Fun tip, make a mathematical calculation and show them how much you need to save every week so that you can afford their education or make a percentage of how much of your income goes into their school fee. This might make them appreciate the privilege of a good education that you have given them and will motivate them to put more effort into their studies.   

Teach them to budget and allocate their own pocket money.

Include your children in certain financial decisions. Take them with you when you do shopping, and explain why you chose a certain brand of milk over the other, and teach them smart buying.

Ask them out loud, about some of your everyday judgement.

Question them, ‘Do we really, really need to buy this?’ ‘Can we skip this expense since we are going for a weekend to Ooty?’ ‘Is this the only option I have to buy this product, or can I buy it elsewhere cheaper?’ and observe the answers that they give.

Encourage them, if their answers are acceptable by implementing their suggestion. If not, explain how else it can be done, but be appreciative and positive of their answers either way.

SAVINGS: Teaching your children to save, will teach them that you need to make choices about how to spend your money. Tell your children that money is finite. When they are young, make them realise that when they spend the money they save, they don’t have more money to save. This gives them a sense of importance to values such as patience and prioritising.  

Introduce them to the concept of Compound Interest. Tell them, ‘The sooner you start saving, the faster your money can grow on Compounding.’

BEING PREPARED:  Insurances and investments can be a tough concept. Even for an adult the financial jargons might terrify them, but make sure that your children know the value and importance of an insurance. Teach them why you pay your annual premiums. Talk to them about all financial threats that might befall in case of an unfortunate incident. This will teach them why it is essential to have the lives of their dear ones covered, and how incredibly an insurance works in order to secure their futures financially.

Being sensitive and careful while dealing this subject, is also important. Making the child understand about emergencies and what happens after, without instilling emotions of fear and panic, is a tricky business. But you need to do it, nevertheless.

What’s more, secure your child’s future by carefully selecting a Child Insurance plan for them, and talk to them about it. Tell them how the money works and why you had chosen a particular plan. And when they are a little older, discuss about comparing plans and how to make the right decision. Give them a detailed report of your past experiences and make sure they learn from both your success and your mistakes.

Introduce them to the various online portals that help compare insurance plans, and teach them how to calculate maturity in such apps and sites.    

Thus, all the financial tricks that you teach your kids at an early stage will stay with them till the grave.

 

THE IMPACT OF SERVICE TAX HIKE TO 15%, ON YOUR DAILY LIFE

 

The Krishi  Kalyan  Cess brought with it a lot of thoughts and doubts. 

The Finance Minister, Arun Jaitley, managed to impose a 0.5% surge in the service tax levied on all the taxable services, through the Krishi Kalyan  Cess.

This trivial increase in the service tax levied will come into effect from June the First, 2016.

Service tax, is basically the tax that is levied on the list of services that are classified as taxable by the central government. The one who will be paying the service tax is the end user.

Now, with the numbers and statistics apart, all of this solely boils down to one question – What does this mean for me?

IMPACT OF SERVICE TAX 

The impact that this minute increase in the service tax will have on you, in simple words, is that any service that attracts service tax will now become more expensive. The Krishi Kalyan  Cess means that your restaurant bills, your travel expenses, your mobile phones and for many other services, you will be paying more that you used a couple of weeks ago. 

You will be paying more for banking services like fund transfer, savings account, processing fee, prep payment, post payment and credit card, charges etc. Not only banking services but banking products also attract service tax. This means that all financial instruments such as equities and insurance will also attract tax. Thus, these products will now cost you more.

HOW THE KRISHIKALYAN  AFFECTS YOUR INSURANCE 

Your insurance however, will have a subjective scheming. The amount of tax levied will depend on the nature and type of the policy that you buy. Pure insurance policies for instance, will be subject to the service tax of 14.5%. Traditional policies, however, are levied at a rate of 3.625%., i.e., one fourth of the service tax rate. So, yes, your insurance is going to cost a little more than it used to before, but does this mean you should stop buying insurances altogether? 

The Indian families have been giving the flimsiest of excuses to availing an insurance policy, and the Government just gave them another excuse to cringe away from the benefits of insurance.  

The increase in costs should not stop you from buying your insurance. Financial experts emphasize that insurances are the safety blanket to your wealth and your life, and the answer to the question, if you need to skip buying an insurance with the hike in costs – is a considerate NO.

Insurance is the fortification of financial management and planning. It is the barricade that protects you and your family in times of unfortunate crises. It guards your family’s financial future and gives them security.

Although this trudge in the service tax will push up your insurance premium, the overall impact of it all, will be marginal.