The Buyt Desk
A report published by National Centre for Financial Education in 2019 stated that only 24% of the Indian population are finacially aware which means 76% population has no idea about financial planning. The survey is a bit old but things havent changed much.That is why it is important to start educating our children about good financial habits.This will help them to have lasting financial competence. Additionally, practical education in financial management will make them less vulnerable to financial troubles.
The government has taken many initiatives on the banking front to educate people, but not children, who are the future. But they can learn this at home.
Children tend to develop habits by observing their parents and surroundings. Parents can educate children about financial management by following good practices at home. Education institutions can also contribute to making education robust by introducing conceptual programs for students.
Financial education at an early age would make children understand the importance of saving and investing. Even if they do not understand all concepts, they will have a basic understanding.
When informed kids grow into adults, they tend to make lesser mistakes.
So, the question is, how to impart finance literacy to children at an early age?
Become an Example – In the age of single children and both working parents, parents are obsessed with their children. Parents want to keep their children engaged and happy, and the easiest way they can do so is to fulfill all their demands. When you fulfill all your child’s demands or pamper them with unjustified gifts, you set an example of extravagance for them. Remember, the fun should not always have to be funded. Be selective and calculative when you buy stuff for kids.
Piggy Bank – It might sound old-school concept, but in the present age also, it is an effective tool to teach money management to children. Money management applications are also working on a similar concept. Remember, everything a child need should not come to him easily. Teach him to earn the rewards. We live in a society where gifting is a culture. Every time children visit their grandparent’s or relative’s house, they get pampered with cash. Explain to your child to spend it carefully.
Differentiat Between Need and Desire– Children are demanding by nature. The parent’s duty is to educate kids to differentiate between need and desire and always prioritize their needs. To buy a book is a need, and cloth could be a desire.
Try to build a habit in your children that they cannot have everything they want, and they have to choose between options based on the budget you have set.
Help Them Prioritize – A small pocket of money can help children prioritize. Every month give them pocket money and let them decide how they want to spend it. Monitor how they spend that. If they choose to spend it on desires, let them manage their needs. It will develop a sense of responsibility in them and a habit of spending on needs first.
