It is evident that today’s youngsters do not possess financial awareness. Youngsters believe that money mysteriously appears in their parents’ pockets to provide for their requests. If you have spent years and years of your hard-earned money to make sure your child has the greatest higher education possible and you can only see that they have not acquired adequate financial education, this is an issue.
Consider taking out an educational loan, but your youngster lacks financial responsibility. Not only will you find yourself in financial trouble, but your child will also blame you for forcing the loan on them. From their standpoint, it does not seem fair that one day they are saddled with the burden of paying back their loans, just being into their career. This is why, while discussing how to raise our children money-knowledgeable, we must be precise.
Teaching your child about finance and money management at a young age is essential if you want them to become a responsible adult with sound financial management skills. Whatever they accomplish in life and how they deal with life’s inevitable achievements and losses, practical financial education will undoubtedly be required.
Money is not a taboo:
Many parents believe that discussing money problems with children is inappropriate. They believe it is their responsibility to shield kids from the “hard realities of the world.” To make matters worse, the notion of money is not taught in schools. Schools back their point of view of not teaching finance or money at early age in school is that kids may get enticed by the lure of the concept of money making, etc., and shall not concentrate on their sides, which is an argument that cannot be fully accepted without testing the waters. The result often is that children grow up in a bubble, unaware of life’s responsibilities.
However, money is not bad. A child may also associate it with enjoyable activities like dining out, watching movies, or purchasing toys. And because these are the only costs they know about, there are three easy measures you can do to help your child become financially informed.
Step 1: Make them understand how money works:
Children should be taught the definition and workings of money as early as age seven or eight. Without being overly preoccupied with tedious mathematics, teaching money may be accomplished in an enjoyable manner. Thus, you may describe how you work to accumulate money for things like food, health care, and education.
When you pay someone money, you should also explain to your child as to what happens to that money. Here’s an example to help your child grasp this idea: the next time you take them shopping, explain that you are giving the store owner money to purchase the item. The store owner then keeps a portion of this money as profit and pays their staff with the remaining funds. The employees also have families; the money we pay for the item that we had purchased goes toward their salaries, which they then use to support their child. As a result, your child may understand how money works in basic terms, which will draw their interest in the next steps of the money flow.
Step 2: The concept of saving:
When your child is around ten or eleven, set up a home bank or piggy bank to offer them a firsthand understanding of saving, interest, and investments. Give your child a set monthly sum of money, such as Rs. 500 or Rs. 1000. Inform them that their money will increase at the end of the month if they can save a portion of this sum. Your child will be able to experience the power of saving firsthand. The concept of delayed gratification is effectively emphasized by this scenario. The child realizes that their money increases if they avoid the crave to spend. They will benefit from this lesson as we live in a consumer-driven and advertising-driven world of today.
Step 3: Show the world of Real Finance:
By their mid-teens, your child should be able to manage some of their own spending. The home bank or the piggy bank they have may now convert to a real savings account in a bank. To help children manage their finances, you may offer them pocket money on a weekly or monthly basis. They would become financially accountable as a result. For example, cutting back on their snacks to pay for a movie that they wish to go, would be one such financial education for them to understand how to manage money.
These points were true 25 years ago when we were kids, hold true even now, and shall hold true even 25 years from now. But since technology has changed our lives, you still need to take some additional actions to help your child become financially independent, such as:
1. Introducing them to FinTech: These days, children are born with smartphones. They have access to vital resources like UPI and online banking. Teaching your children how to use these features is crucial. Assist them with the money transfer and demonstrate how UPI operates. This will shield your children from online scams and provide them with first-hand exposure of how technology functions.
2. Knowing ‘needs’ vs ‘wants’: In-app purchases have made it simple for children to shop anywhere anything. Teaching children to differentiate between necessities and wants is therefore essential. This is where the idea of delayed gratification is useful since we may encourage them to hold off on making any major purchases such as a digital camera or a smartphone or pricey headphones or iPads, etc, for 30 days. They will then be able to determine if the item is a “need” or only a “want”.
3. Track the money: By tracking the money on where it goes will teach your child the importance of money in the competitive world of today. Your child will learn how to budget their pocket money if they are able to keep a journal of their spending.
Conclusion:
Despite the fact that knowing how to handle money is an essential life skill, this is not taught in school. Even if they do, like many other things we learn in school, there is a gap with actual life.
Consequently, we parents bear the weight of responsibility. Only by making your child financially informed and knowledgeable will they recognize the work you put in to save money for their costs, such as for their higher education or for their wedding expenses, etc. Perhaps the most significant gift you provide them is the ability to deal with the financial issues of the real world.
