Money management is no child’s play

Give kids the freedom to spend, but monitor whether the money is being spent wisely

Most of us understand the importance of money management only after a couple of mishaps with organising our own incomes and expenses. The sooner the realisation, the better it is for our finances.

So, it is very important to create financial awareness in your children from a very young age. Instead of giving them money whenever they want, you must part with a specific amount periodically and ask them to manage their expenses within what is available.

The mode of giving money to your children is important, given that you also would want to monitor whether the money is being spent judiciously.

Add-on credit cards and money-management apps are some of the options available for these purposes.

Kids’ savings accounts

Most banks allow opening of accounts in the name of minors above the age of 10. They issue debit cards, too, which kids can use to withdraw cash or make transactions online, subject to a certain limit.

For example, KIDS Debit card from IDBI Bank allows the minor to withdraw up to ₹2,000 as well as make purchases worth ₹2,000 in a day. On opening a Smart Star savings account in ICICI Bank, in addition to a debit card with a spend and withdrawal limit of ₹5,000, a cheque book will also be issued in the name of the child.

Add-on cards

If you or your spouse has a credit card, an add-on or supplementary credit card can be obtained using that and can be given to your child.

An add-on card usually shares the credit limit of the primary card-holder. It is also possible to fix a lower limit if the parent wants to. Many banks such as SBI and Citi Bank provide these add-on cards free of cost.

At the end of the day, the parent is the one who has to pay the bills, which will help them track the withdrawals and spends made by the child.

Each time the add-on credit card is used, the parent gets an alert in the form of an SMS.

Go digital

There are many money-management mobile apps that help categorise expenses, track spends, set budgets and give warnings. While a few apps require you to manually input transactions, others are automated. Apps such as Walnut are automated — they track expenses (cashless) from the text messages received from banks. These apps also help split bills with friends and transfer money. Parents can encourage their children to use such apps as they help identify large spend categories and manage funds.

One app that focusses more on teenagers and their money management is Slonkit. This app also comes with a prepaid VISA card that can be loaded by the parent with a specified amount. The parent could download the app and give the card to the child. As the card is linked to the mobile app, details of all card transactions are automatically tracked and categorised under food, travel, movies, etc, in the app. The card also provides some limited instant credit on request during emergencies.

Through these apps, you could analyse your child’s spending pattern across categories, set alerts and fix daily spend limits.

Over time, such organised spending habits can create a sense of financial discipline in your child.

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