IntroductionÂ
The world of finance is quite interesting to understand with the right inquisitiveness. It may be complex at times; however, finance is a part of our daily life. It is much more than handling cash. When money is effectively spent and saved, an individual’s lifelong goals can be met. If children are educated and taught the basic concepts of practical finance, it will help them avoid financial mismanagement. Only when they learn how to deal with their daily finances can they be called financially responsible adults walking towards a brighter, secure future.
What is financial literacy?
In simple terms, financial literacy means using one’s knowledge and skills to manage money and day-to-day finances for financial well-being. Being financially literate involves saving enough money to make investments, like fixed deposits and PPF, which can be handy during emergencies.
How can children build saving habits?
It is said that learning begins at home. This applies to financial literacy too. Some parents fear providing regular pocket money to their children, thinking it may encourage them to spend unnecessarily. However, if parents can communicate the idea of savings rightfully to children, pocket money can be an essential tool to help them build responsible saving and spending habits.
Children can offer to help their elders with basic tasks at home. They can offer a pillar of support for general chores and, in return, earn pocket money. Parents can teach them the lasting benefits of saving their pocket money for emergencies. They can monitor this by maintaining a tracker and updating it on a weekly or monthly basis. Parents can sit down with their children and make them understand how their money flows and show them the progress made on their savings.
Let us understand this with the help of an example.
Mr. A goes for the weekly grocery shopping and takes his kids along. He gives INR 500 to both his children and asks them to buy as many groceries as they can buy. Every week, the children learn to make the most effective use of that INR 500 and even save most of it. The money saved during this weekly grocery shopping is updated in the tracker. At the end of the month, Mr. A summarises the total savings to his kids and helps them understand the different practical and reasonable spending makes.
Also, parents can engage children in activities like gardening, cooking, extracurricular sports, etc. This helps develop children’s skills and makes them realize the value of hard work and money earned. A lot of money can be saved by avoiding unnecessarily and regularly dining out. Instead, parents can encourage children to healthy eating, and, once in a while, reward them for money saved by dining out.
How can you teach children financial literacy?
When it comes to personal finances, even professionals like physicians, attorneys, and professors lack expertise. Children can make the correct decision at the appropriate moment if they grasp the relevance of financial markets from an early age.
Finsav has unique inbuilt financial learning features such as Finsav courses, blogs, and social learning. Various short-term money management courses are accessible online and offline for high school and college students.
Parents should urge their children to enroll in financial literacy programs like Finsav’s courses to make the best financial decisions possible. Also, Finsav offers customized financial learning tools that cater to children’s unique needs and help them learn about finance better and relate to it from their perspective. These courses help shape them into financially literate individuals ready to face the world.
Financial literacy ultimately involves combining the financial, credit, and debt management information required to make financially responsible decisions that affect our daily life. Understanding how money works, what borrowing loans and using credit cards mean, and how to prevent debt are all examples of financial literacy.
To summarise, the importance of financial literacy lies in its significant influence on families as they attempt to manage their budgets, purchase a home, support their children’s education, and assure a retirement income.
Why is it beneficial to educate children on financial literacy?
Teaching financial literacy to children at an early age has several advantages, including that your children will grasp the value of money and expect less from you. Explaining the cost of products to youngsters will help them gradually determine what is and is not pricey in society.
If kids understand financial hazards, they will be better equipped to avoid debt and bankruptcy in the future. Once adolescents comprehend the worth of things, they may be more willing to make plans for the future, like saving money for a trip, saving and investing in different assets such as real estate, or even putting money aside for retirement. They will live happier, less stressful lives—this benefit is sometimes overlooked when considering the long-term impacts of financial literacy, but it should be emphasized.
Parents can ensure that they include children while discussing some basic family financial matters. It takes courage but pays off to have an open and honest dialogue with your children about the difficulties of managing funds. You’ll be able to steer your children along the correct path by talking about your own financial experiences. In this way, they’ll feel comfortable approaching you for help.
Why is financial literacy necessary for children?
Most parents provide a piggy bank. However, in today’s digital age, parents can shift to providing money via digital wallets and digital piggy banks for kids to save money. These can be utilized to store spare change, birthday money, or cash gifts from relatives or families. This practice aids them in maintaining a saving discipline.
Financial markets are complex and go well beyond the concept of just saving. However, when children comprehend the basic practice of savings through financial education, they may be able to relate with their elders positively. This will help children pass on similar knowledge and experience to future generations. As a result, encouraging financial literacy and boosting financial awareness among children and adolescents may be advantageous.
Teach them young and watch them grow
A habit is like a thick rope, in the way that you weave a thread of it every day, so that it cannot be severed, at the very least. Both excellent and harmful habits can be ingrained in children early at home. Sound financial practices are no exception to this. Children should be taught not to borrow money or live above their means from their formative years.
Conclusion
Apart from the measures taken by organizations, parents should also instill financial literacy in their children by going grocery shopping with them, placing online orders in the presence of their children, and teaching them the fundamentals of money. Practically making investments in financial instruments, even of a small value, goes a long way. This may teach them responsibility and help them comprehend investment instruments. Basic activities like maintaining a budget tracker to monitor cash inflow and outflow can go a long way in the future. Personally, the bond between children and their parents can flourish, and mutual respect will grow with such practices.
