The best gift to your child on this Children’s Day would be developing the quest in your child to achieve financial independence through imparting the knowledge about savings and investments. It’s a dream for everyone to have enough passive income to acquire the status of financial independence and spend rest of the life without having to be employed or dependent on others.
Apart from successful business and profession, one may start saving and investing early to have enough income to pay one’s living expenses for the rest of the life and achieve the financial independence. For that one should become financially independent early to start investing as early as possible to take full advantage of the power of compounding.
To make your child financially independent early, you may do the following:
Teach them to save
Gift children piggy banks on first birthday itself and encourage them to put whatever money they get in the piggy bank even before they learn how to count. Show them how to use piggy banks by putting the money gifted to them in front of them, so that they also develop a sense of ownership of the piggy bank and the money in it.
Open savings accounts for them
When they start going to schools, open savings accounts for them, which apart from providing practical knowledge about financial systems, have them sense of responsibility and ownership as well. Explain to them that apart from making their saved money safer, deposits in banks also draw interests unlike the money lying idle in piggy banks.
Teach financial lesions
When they start learning about buying, selling, profit, loss, interest etc in their mathematics classes, show them how much interest they got in their savings account, so that they develop more interest in the subject and themselves calculate the rate of interest they got from time to time.
Inflation Explained: What is Inflation, Types and Causes?
Teach them the importance of investing
In their teenage, introduce the concept of inflation to teach them the importance of investing by showing the calculation how inflation eating up the purchasing power of the money kept in the saving accounts. Let them calculate the money that would be required for their higher education. Show the valuation of the investments that you started for them, so that they may compare the returns and get encouraged about the goal-based investments.
Encourage them to invest early
As soon as they start earning, encourage them to curtail unnecessary spending, save as much as possible and start investing through systematic investment plan (SIP). Demonstrating them how length of investment plays a crucial role in the wonder of the power of compounding and would help them in achieving financial goals and ultimately the status of financial independence over time.