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It was a lazy Sunday afternoon when we decided to show the boys online statements of their newly (6 months ago) opened minor bank accounts. Almost immediately one of them noticed that his brother’s account had a slightly higher balance and questioned me about it. Ideally, it should have been the same since the balance with which the accounts were started was the same. The culprit was the interest paid by the bank; it had taken a few extra days to open one of the accounts and that was causing the difference in the overall balance.
Explaining this to the boys, two things came forth. They were happy that the bank was paying them ‘extra’ money and it struck me that we were finally ready to initiate our 10-year-old twin boys into the world of investing. Seizing the opportunity was important. Children this age have an attention span that lasts no longer than 10 minutes, hence, I quickly suggested that the funds lying in their bank accounts deserve to get invested in even better ways.
Not surprisingly, the boys were familiar with the concept of investing, having heard my husband talk shop on the phone through the day or me recording a personal finance video, thanks to 2020’s work from home normal.
Immediately, one of them piqued up saying “In mutual funds, mamma?”
The surprising part was the follow-up questions. The questions came through simply and logically. “Do we have to invest the entire amount?” “Can we take out the money when we want?” “How long does it have to be invested?” “How much will we make in this period?”
I had no idea that children this age could comprehend the concept of investing so intelligibly.
Their questions continued and when one of them asked me about how long until this investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... becomes ₹1 lakh, I opened an excel sheet and showed them the simulation which demonstrated that the longer this money was left invested, the more they could earn from it.
The end result was that both wanted us to take whatever pocket money and leftover funds they had at the end of every three months and add it to their investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... account.
At the same time, they were very clear that some money was to be left in the bank account for sudden purchases, what if there was an emergency and they just had to have the newest game launched on the PS4? Just as an aside, the PS4 was also jointly purchased by the two of them with saved up birthday money.
I was elated by the end of the day and super excited that my children will begin their investing journey early.
It also got me thinking that I never did this. In fact, I was a late starter in what should have been a spontaneous extension of my professional learning into my personal money life. It was probably closer to my 30th birthday, by the time I started taking investing seriously. We did have investments before that too, but they weren’t well thought through. Needless risks were taken, not enough thought put into how much to save every month and where.
My children, with our help, are getting a 20-year head start!
At an assumed annualised rate of return of 12% a year, ₹10,000 becomes ₹1 lakh in 20 years.
When one of them asked me, if the money they save up through the next few years can help fund their college fees, I knew that it’s never too early to discuss money with your kids. Not wanting to break their heart by divulging the exorbitant cost of higher education, I evaded the question a bit; if it isn’t perfect grades then it is perfectly expensive colleges that one needs to apply to!
Nevertheless, their excitement and desire to have this investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... in their name, to see it grow is palpable.
Their minds soaked up and absorbed the fact that they need to wait for long periods to see the money create wealth for them.
It is just so much easier to explain this at a young age than later when desires to spend on things we don’t need creep in, taking away the ability to save more. If we are lucky, this early start will take them down the path of financial freedom sooner than later; helping them make the most meaningful choices in life without anxiety over money matters.
At the moment, we are driving this phase for them. As parents, we are managing their money, seeding the idea of investing and even completing the process operationally. Hopefully, just the awareness and seeing the change in value will give them the courage to take it up on their own once they can do so.
For the moment, step one is done. Any regret I had at starting late is now overshadowed by the unplanned initiation my children got into the world of investing at a young age.
I’m getting dreamy-eyed thinking that this is my second chance at getting it right.
It’s not.
It’s their first chance at being ahead in the game; hopefully, that means they have the luxury of making mistakes along the way, giving themselves time to get up, dust it off and start again.