Some of the biggest life lessons for children come by way of their parents. Children constantly observe their parents and begin mirroring their behaviour. So if the parents are sticklers for cleanliness, chances are that the child will pick up this trait and become conscious of being clean and tidy at home and school. But if parents constantly bicker and use abusive language towards each other, children will pick that up, too! They are always watching, observing and mimicking – so the best way to raise a well-rounded individual is to lead by example.

In this context, let us mention the financial behaviours of parents, too. Some households are guilty of leaving money lying around, or of wasting it on frivolous expenses, or spending all the available funds before the end of the month. These behaviours lead to compromises and less than ideal adjustments in daily life – and children pick up on these, too. When they see their parents being wasteful about money, or on the other hand, too stingy with the finances, they learn to imitate these behaviours. Soon, the child either splurges their pocket money or holds on to it like their life depends on it! Either way, the child does not inculcate a healthy attitude towards money and expenditure.

Teaching your child about money

Though lessons on money management need not be drilled into the child’s head at all times, a few early lessons certainly help. A financially aware child is better equipped to handle the challenges of handling money as an adult.[1] Most children are too young to comprehend that money is not an unlimited resource, and there may be times when getting access to money is not as simple as going to the ATM and watching money notes fly out of the machine.[2]

  • Start by giving the child their own piggy bank, and be the first one to give them some money to deposit in it. Get a piggy bank that needs to be broken once it is full, instead of one that can be opened with a key – if the child has access to the funds, they will be tempted to open it regularly.
  • Once the piggy bank is full, celebrate it and gather the family around as you break it. Now sit with the child and count the money. They will be really excited at this point with the possibilities of what can be done with it – get a new toy, or a book, or play a video game.
  • It is now crucial to handle the situation properly – sit your child down and tell them that they can put the money to good use. Either they can open a savings account in the bank or get a fixed deposit in their name. Tell them that they can have a part of the money saved as a treat, but that the remaining must go to the bank. This is a good time to explain concepts like savings and fixed deposits to slightly older children.
  • Aim to make this a regular activity. Let the child save money for a few months, and then deposit it in the bank. Take them to the bank to deposit the money by themselves – this will help them learn how to fill out cash deposit slips, how to talk to the teller and how to take a counterfoil or passbook entry.

Is savings better or creating fixed deposits?

When money is deposited in the savings bank account, it remains in the bank’s custody till such time that it is withdrawn by the account holder. Normally, people use savings accounts to create a corpus for the future, and it is not an ideal practice to use the money for daily expenditure. Over time, the corpus grows in size.

The corpus also grows periodically when the bank pays an interest on the savings funds. Normally, Indian banks pay about 4% interest on the money in the savings account. The interest is paid quarterly, and the more the monies lying in the account, the more is the interest earned on it.

While many people prefer to keep their own and even their children’s savings in the bank, this option is not as ideal as creating a fixed deposit with the money. Savings account interest is not as high as FD interest rates (about 7.25% in most cases) so the earning is not as high in the former than in the latter. If you are aiming to keep your child’s money safe, then keeping it in savings bank account is a good option. But if you want to help your child create wealth, then creating an online fixed deposit helps. Find out the interest rates on fixed deposits before you proceed.

How to create the fixed deposit – a digital piggy bank for your child

There is no need to go to the bank with your child – just access the bank’s portal to open an online fixed deposit[3].

  • Sit with your child as you open the bank’s portal and look for ‘fixed deposits’. Peruse the FD interest rates with them and explain the parts they don’t understand.
  • Now fill out the application form as directed. The best banks in India offer a free savings account with the online fixed deposit.
  • Deposit the monies from your child’s savings. That’s it!

The bank notifies the customer about the date of maturity of the FD. Once it matures, you can choose to reinvest the FD or use it for your child’s education or to send your child on a trip.




By Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to