Teach Your Kids About Money

Finance remains integral to everyone, but very few understand it. Hence, to increase the financial awareness of the people, there must be lessons on money and personal finance in school curriculum. Even when it comes to discussion with kids, parents normally talk on morals, health, academics, sports, social values and even on technology, but when it comes to money, they are limited only to pocket money and piggy banks. It is very important that, apart from the other topics, parents must inculcate personal finance knowledge in their children. The trend is now changing and most of the parents are involving their children in financial matters.



In India, there are initiatives taken by many institutions (government as well as non-government) to make children financially literate. Banks have come up with savings bank accounts for children above 10 years. These bank accounts also provide children with the debit card facility as well the facility to operate it digitally. Despite all the initiatives taken by the different institutions, the level of financial literacy is quite low in India. There was a survey conducted by the S&P (Standard & Poor) which showed that 76 per cent of the Indian adults do not understand key basic financial concepts. The survey examined four financial concepts, viz. risk diversification, inflation, numeracy and interest compounding, in over 140 countries and 1.5 lakh people. 

As you can see from the figure that financial literacy in the major emerging economies is decreasing with growing age. This shows that the financial literacy among the youth of the major emerging economies is increasing. But the thing to note is that the major emerging economies also include Brazil, China, Russian Federation and South Africa, apart from India. If we look at the previous figure, then the financial literacy is least when compared with other major emerging economies. So, based on that, we can say that even the financial literacy among the youth of India may be less as compared to other major developing economies.



If we look at the survey carried out by the S&P and its results, then we can understand where we stand globally when it comes to financial literacy. Therefore, to improve the financial literacy in India, it should start at a young age. This will help in building confidence and inculcate a sense of responsibility among children. 

It is very essential for a child to be financially literate to take better financial decisions. There are various ways to achieve this.

Teach them the value of money 

These days, it can be seen that children do not understand the real value of money. Psychologically, a thing earned by a person on his own carries more value than that which he has received without any effort. So, it becomes important for you as a parent to make your children understand the value of money. Make them earn the money. There are various ways to do that. You can ask your children to do certain work at home and pay them a reasonable amount for that work. For example, ask them to post a letter, ask them to bring something from nearby shop or the chemist, ask them to water your plants, etc
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Teach them basic budgeting 

When you send your child to get some groceries from the nearby shop, let them pay and keep the change. This will help them to observe financial diligence. Many parents give pocket money to their children. Let them keep the record of how much pocket money they get and how much they spent. At the end of the month, sit with them and explain where they could have saved money and how they should manage the pocket money. This will help children to make a habit of having a budget in place and go ahead accordingly.


Teach them about basic banking 

Banks plays a very crucial role when it comes to money. There are many banks which have dedicated bank accounts for the minor. Let your children go themselves and open their first ever bank account and let the bank help them with the same. These accounts also gives them a hands-on digital banking experience. At the end of every month, sit with them and explain how to read the bank statement. This will help them to get into the habit of keeping track of their banking transactions. Teach them about debts and loans This would be one of the biggest learnings that you can give to your children to help them avoid getting into a debt trap in future and also make them take the advantage of debt wisely. If they demand something, may it be a video game or a gadget or anything of that sort, then give it to them on credit saying that they have to pay it back some amount every month from their pocket money. This way, you can teach them various terms like loans, EMIs, interest, etc. There are two advantages to this. First, children would learn how to use debt wisely. Secondly, they will save in such a way that they don’t need to take loan.

Teach them about investments 

Like debt and loan, you may also teach your children about investment. Once your children attain the age of 16-18 years, it becomes important to make them understand the importance of investing for wealth creation. Make them start SIP with minimum possible amount in a balanced fund. Explain them some of the basic terms such as SIP, units, NAV, stock market, equities, bonds, etc. and let them explore the world of investments. This will help them when they start their first job. 

Teach them basic financial planning 

It is very important to teach your children the importance of financial planning. The most efficient way of investment is to attach that investment to a goal. Explaining your child regarding financial planning, what are financial goals, how to set those goals, etc. will help them make investment linked to their goals. Understanding the importance and basics of financial planning will help them start the financial planning and investment at a very early age, which would in turn help them to create wealth.

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