Awareness on savings and finances is imperative for a better and stable future, one that will not be impacted by any pandemic or other natural disasters or shocks in life.
The pandemic Covid-19 has caused widespread destruction and has exposed the weakness in our society not only on the infrastructure front but on the personal front as well. Weakness on the health front apart, the pandemic exposed the financial weakness and constraints of the society.
Many lost their jobs and had to dig into their savings to survive the pandemic. The virus exposed our lack of preparedness for a rainy day. The blame for it has to fall on the lack of education to manage our finances better in times of adversity.
Our education system prepares us for seeking a job and excelling in many subjects, but what it does not teach us from early years of schooling is how to handle money. That leads us back to the point of why the seeds of financial literacy need to be sown from early years.
Let us look at some of the ways to develop a healthy mind-set in respect to finance:
Wants and needs
The first step towards educating a child in financial matters is to make him differentiate between a want and a need. For a child, their parent mostly meets all their wants, irrespective of the fact if the child needs a particular thing. By laying a difference and educating them to spend on their needs and save the remaining money helps them appreciate the value of money. The harmful effects of wasteful spending need to be demonstrated early in life. Parents can inculcate healthy money lessons by playing games like Monopoly, Cash flow, etc. with their kids. These games help turn on the reasoning hat, give them valuable insights on spending, and improve their financial acumen.
Money is in limited supply
The pandemic has brought into light the point of limited supply of money. Even the biggest business houses felt the cash crunch during this period. A child needs to know the importance of living within their means, and how unnecessary splurging can impact his future. Making them earn their pocket money by doing chores is a way to help them develop respect for money.
Importance of budgeting and saving
Indian parents traditionally do not discuss their financials with their children. Involving a child in the budgeting process of the family gives him the true picture as well as makes him aware of the ends that need to be pulled for shaping a better future. With his emotions involved in the budgeting process, the child will be more conscious of every rupee he spends.
Relationship between time and money
Every child must be gifted a piggy bank to inculcate in him the habit of saving. The joy on his face when a piggy bank is broken, and all his savings pour out should be capitalized by explaining the concept of saving and investing. Money, like a child, needs time to grow. It needs to be fed with more money regularly and mixed with the fertiliser called ‘interest’ to become a self-sustaining tree.
Investing is a life skill
Investing is now a life skill – the sooner it is learnt, the better will be its fruits. As legendary investor Warren Buffett says, “If you don’t find a way to make money while you sleep, you will work until you die”. The very fact that money can work for you rather than you working for money has to be ingrained in every child to benefit from the concept of compounding in his adulthood.
Awareness on savings and finances is hence imperative for a better and stable future, one that will not be impacted by any pandemic or other natural disasters or shocks in life.
(By Vikas Singhania, CEO, TradeSmart)