Worrying about the future of your children is something that every parent is worried about. The first worry is about the health of the children and the second is how happy they are with their choices in life. But as the children start growing up, parents start worrying about a thing on which their future depends. The name of this worry is money. It has two dimensions. The first is how he saves money for his future and the second is how much he understands the importance of saving money?
Standard Life Bank in Britain has conducted a survey, which revealed that seven out of ten parents are worried about the financial future of their children. Studies have shown that teaching children to use money properly at an early age makes a difference to their entire life. But saving money for the future is not that easy. Behavioral economics expert and author Dan Ariely of Duke University in the US says, “One drawback of money is that it has no limits. Because of this, we find it very difficult to think about what it will really mean in the future.”
In the news podcast Money Box, Felicity Hanna spoke with Kirsty Stone, financial planner at The Private Office, and Stephanie Fitzgerald, director of youth affairs at The Money Charity, who have given three special tips to overcome this concern. Fitzgerald says that parents should give children some opportunities to use money properly, so that they can make some mistakes themselves.
1. Long-term accounts
Our children do not need money immediately. In such a situation, investing for a long time is a profitable deal. The expert says that the bank also opens accounts for children. With the help of these accounts, children can be taught how to deposit and withdraw money. Banks usually provide the facility of two types of accounts. One is in which money can be deposited and withdrawn anytime, while in the other accounts money has to be deposited for a fixed period.
It is also called bank FD in common language. Experts say that long-term accounts give more interest than savings accounts. Experts say that before opening a savings account for children, a person can go to an online website and compare which bank is giving more interest. Parents can also open such an account in the bank for their children, in which the child will be able to withdraw money only after he turns 18. In such a situation, the child can deposit money in it for a long time.
Experts say that parents have to prepare their children for that time and have a conversation first in which they can be explained what that money will be used for. The money the child is depositing will be used for university fees or to buy a car for him. This should be told to them. Saving money for unexpected events in life will make children feel more secure.
2. Save money gradually
Saving money for children at present is no less than a big gift for their future. With this money, not only can they start their adult life well, but by making them a part of that whole process, they can also learn important lessons about money and they will know the importance of money better. Experts say that if you are not able to save money for some time due to the poor condition of the family, then there is nothing to worry about. The important thing is not to take a loan and do not use a credit card for any such thing. Fitzgerald says that it is every parent’s dream to give their children a better and secure future, but the reality is that due to inflation we are facing difficulties in running our lives and in such a situation, people’s ability to save has clearly decreased.
3. Do not ignore the magic of compound interest
Some people define compound interest as free money, while some people call it the eighth wonder of the world, because it increases your capital many times and the person does not even realize it. Suppose you started with a savings account and the bank gives you an interest of five percent per annum on this savings account. You have deposited 10 thousand rupees in this account. Now read the story further and see how these 10 thousand rupees will be seen growing rapidly.
At the end of one year, the 10 thousand you have kept in the savings account will become 10500 after applying interest. The thing to keep in mind is that you will get to see the magic of compound interest only when you will neither withdraw the principal nor the interest money from the bank account.
Now let’s come to the second year.
In the second year, you will not get only 500 rupees interest like in the first year. This year you will get an annual interest of 5% on Rs 10,500, which will be Rs 525. That means at the end of the second year, your Rs 10,000 in your savings account will increase to Rs 11,025.
In the third year, you will get an annual interest of Rs 550 on this Rs 11,025 and your amount will increase to Rs 11,575.
In the fourth year, this amount will become Rs 12,153, while in the fifth year, this amount will increase to Rs 12,760.
When the children turn 18, this amount will become quite substantial.
Experts say that you should save a little bit and leave the rest to mathematics. It will do the magic itself.
4. Buy a piggy bank
Experts say that if you want to teach children about the importance of money, then buy them a piggy bank. Experts say that buying a piggy bank will teach the child that money is not a toy and it should be kept in a safe place. The piggy bank also helps children understand the value of different rupee coins. They will know that a five rupee coin is worth more than a two rupee coin. Experts say that giving pocket money to children is a good start. It is true that every parent saves for their children but it is also important that our children understand the value of money and by doing so, their future will be better.
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