We need to teach our kids about money and how to make money grow. But not all of us know how to do so, read on for more tips…
Let me present a strange analogy:
Kids are like money since they are your most valuable asset, whereas money is like kids since you don’t want anything unfortunate happening to it.
Handling kids is tough. Handling money is also tough.
Hence, you can imagine how handling both of them together can become way too chaotic.
You must be thinking what the big deal is. Your kid will learn finances just the way you learnt.
But today, teaching kids how to handle cash has become very difficult as compared to the simple past. Technology revolving around finance has evolved a lot and physical monetary transactions are soon becoming obsolete.
Physical cash-in-hand is becoming rarer and rarer (don’t get confused, Kohinoor still remains the rarest!). Hence, it is important for parents to realize that they must make conscious efforts to make their kids understand the importance of money.
This rise of mobile apps and games targeted towards children has made it difficult for parents to constantly monitor their young one’s screen-actions.
Downloading a seemingly simple mobile game can become an incredible expense sometimes.
PUBG, Candy Crush, Subway Surfers are just some of the most popular games which come with in-app purchases.
For those in the unknown, in-app purchases mean that the player can pay real money and get hold of special costumes, maybe lives or some additional luxury feature in the context of a particular game.
For those who keep their credit card details loaded into their mobile phones, beware about any in-app purchase your kid may have innocently made.
Through games and apps like these, monetary control rests right under the kid’s nose. Therefore, parents must either not download such type of games or alternatively, turn off in-app purchases through settings.
Start Teaching from the Basics
There is no correct age for starting to teach basics of money to your kid. Experts believe that kids as young as five start to understand money as an indispensable commodity.
Discussing money and related topics with kids isn’t very simple, however. But it is important to teach kids about money so that they can manage money better when they grow up.
Indian parents, especially fathers, choose not to divulge details of their own financial standing to their kids, citing protection from financial stresses and burden as the reason behind this.
As of late, however, there has been a rise in money-related discussions within parents and children
Mobile apps intended for children are being created to show them cash management through straightforward techniques.
Kids who are currently studying should read How to save money as a student for tips.
Financial Education in India
It is unfortunate how the Indian education system does not offer financial education of any sorts. A 12th pass student will definitely know what Pythagoras Theorem is, but will not know how to fill out a check.
All this practical financial knowledge is dependent upon a child’s home environment. It is the duty of parents and guardians to teach their children the importance of saving, investing, banking etc.
Financial education is becoming increasingly important nowadays. This is because children have started earning early on in their college through innovative measures like work-from-home and part-time internships. Hence, it is important to give them a reality check before they go out and start earning.
Initially, kids may think that they are making good money when their monthly income is currently 12,000/-
It is essential that they realize that their monthly expenses which include rent, food, electricity etc. are 25,000/- and that currently they are only earning half of what their bare minimum expenses are.
It’s essential that parents make their children realize the actual cost of supporting themselves.
What’s more, it’s never too soon to inculcate the great habit of saving in your children since it is believed that our cash personalities (whether savers or spenders) develop early.
School education does not teach kids about money and how they can make money.
Since we cannot do anything about the state of the Indian Education System, it is essential that what can’t be taught in a classroom should be supplemented at home by parents.
Therefore in any case, the obligation of making a child financially literate belongs 100 percent to the parents.
Role of Technology in Financial Education
Innovation and technology is additionally making it simpler to inculcate money-related ideas in kids at appropriate ages.
There are several apps which focus on educating young children the system of money, credit, earning and saving. A finished chore by the kid will provide him with some credits. The kid can likewise redeem this credit for non-money rewards like an hour of watching TV.
While apps can be a valuable method to introduce your kids to cash management, experts believe that parents shouldn’t rely exclusively on apps for this exercise. These instruments should just be utilized as supplements to your teachings.
Teach kids about money : Making a ‘Baby Budget’
It is important to inculcate financial discipline in kids right from their childhood.
This will ensure that they do not develop lousy habits regarding spending, saving and making money.
To teach kids the importance of saving money, I think we should provide them with a monthly pocket money and ask them to manage it with utmost discipline and precision.
For older kids, you can teach them the 50/20/30 guideline.
They may take a while to understand the concept behind this, but trust me, it’ll be worth the effort.
For those who don’t know, the 50/20/30 rule offers a fundamental budgetary system for your spending and sparing. The standard says that you ought to burn through half of your pay on your everyday costs.
According to this guideline, you should invest 20% of your salary in investment funds and make provisions for savings. You can utilize the rest 30% for recreational activities without worrying about a cash crunch.
Since the 50/20/30 standard is just a guideline, you can modify it to suit kids.
You can ask your kid to limit his/her stationery and other essential requirements to 50% of what he/she gets monthly, save 30% in his/her piggy bank and is free to spend 20% on activities like buying chips and chocolates.
You can change the specific portions dependent on your kid’s age and individual preferences.
Apart from this, you must ask your kid to save extra if he/she wants something especially expensive. If it’s extraordinarily expensive, you can maybe save with your kid like you can contribute Rs.2 for every rupee saved by your kid.
Also, you must take your kid along and demonstrate to him/her how things work in a bank. You can start with simple procedures like withdrawing cash, writing a check and depositing it, accessing lockers, opening an account etc.
With the help of Bachat App it will be very easy to set goals and create budget as per you need.
Financial education is often misunderstood as being uniform for everyone.
But, no, that’s not the case.
What most people fail to understand is that financial advice and education has to be customized for every individual in order to make sense.
Therefore, its essential to tech children basic financial terminology but when it comes to making complex financial decisions, the children must grow old to understand that they will have to deal with the decision on a discretionary basis.
A lack of financial knowledge can hurt citizens in the long run as it directly leads to higher borrowings, debts, less-to-no savings, lack of emergency fund etc. Therefore, try not to skip/avoid this crucial step in the upbringing of your precious child. Teaching simple concepts can take a toll on your patience, but trust me, it’s worth it!
Short answer, no. Schools do not teach even the basics of money to children.
Yes. A financially educated child has a much higher chance of being financially healthy in the future.