One thing your kids must learn about retirement savings …

Financial experts agree that talking to kids about money can help them make better financial decisions as they grow up, and that these conversations should start early and happen often.

For young children, the concept of retirement would be hard to fathom, however, this is the time to lay down the foundation for future retirement related conversations. Concepts such as wants vs needs, money recognition and earning and saving money for a goal etc., can be introduced to the children as early as age 4. Repetition through story books, playful activities and money related conversations can be used to reinforce these concepts.

As they grow older, the next step is to introduce the children to the concepts of allowance, budgeting, retirement and living within one’s means. I play a game with my 8 year old niece to introduce her to the importance of retirement savings and to practice saving for retirement. I give her a small allowance every month and she generally has full freedom to save or spend it. She however needs to disclose how she is spending this money to me every month. Then, once or twice a year, we have a retirement month when this allowance is skipped. My niece has to now manage during these retirement months without her allowance. After some initial shocks, she has gotten really good at saving for the retirement months in our game. The hope is that when she goes into the outside world, she will use these learned concepts to make wise decisions regarding her retirements.

As my niece grows older, I would like to help her open a Roth IRA account so that she can learn and

Teaching kids the meaning of retirement savings

understand the power of compound interest. She will learn that if she invests $1000 today, she will get back $12,000 in 50 years (@ 5% interest rate). As she invests her savings in the Roth IRA and it grows, she will have a head start in terms of preparing for retirement.

Financial instruments are growing increasingly complex every day. With the advent of crypto-currencies and explosion in financial technology, even the most educated adults find it difficult to keep pace with changing financial landscape. As a financial professional, I do think that the children around me – my son, nephews and nieces – would have an earlier introduction to financial concepts as a result of the money conversations I often have with them. As a financial professional, I saw a gap in the market for a children’s book that opens up dialogue between the parents and their children and hence I wrote Liktoon’s boat –  a book that introduces the concepts of earning and saving money for a goal.


About the author: Radha Rai is a financial professional with experience in Retail and Investment banking, currently working as a credit risk professional in leveraged finance at Deutsche bank. She recently published a new book, Liktoon’s Boat, with help from her husband, Abhijit. Liktoon’s Boat is an endearing and educational book to help promote financial literacy among children. For more information on Liktoon’s Boat visit


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