By Vivek Bajaj, Cofounder StockEdge & Elearnmarkets
Irrespective of numerous workshops, courses and programmes which are available for children to learn about money, finance, and business, these are typically not included in the regular school curriculum.
As a result, children do get the formal education and get into specialised area of their interest, they fail to understand the importance of money management, basics of finance and business which is very much required to understand in today’s world to catch up.
And the main reason why one should teach their kids about finances, are:
- distinguishing between the needs and wants from a young age
- understand the importance of opportunity cost
- learn about saving and investing
- develop their emotions and approach toward valuing money
Here are some ideas through which parents can introduce financial literacy to their children:
Give them a Pocket Money
Giving children pocket money is not a common practise in India. Most parents provide for their children’s every need and desire. It goes beyond the basics, and while there is nothing wrong with providing for your children, children will not understand the value of money and saving it in this manner.
Giving them a small sum of money can help them make their own decisions about saving money and purchasing what they want. They may make wrong decisions to start off with but that is how they will learn from their mistakes.
Lessons are learnt better from practical experiences compared to when they come from adults.
Make them earn their Pocket Money
Create an incentive concept in addition to pocket money or make them earn that amount. Earning will teach them the value of work and money at a young age. They will also learn which desires they should prioritise. Furthermore, they will learn to contribute to too few tasks that you create. These tasks may include assisting in the kitchen, cleaning their bedroom, cleaning the car, purchasing groceries, and so on.
Make them contribute to their personal non-essential purchases
Many children demand things that they do not actually require. As parents, you must decide whether to buy your children what they desire. It is a difficult decision, but by doing so, you can teach your children to contribute to what they desire. Inquire about their savings and how much they are willing to contribute toward what they desire. This teaches them how to live in a community and the value of giving back. These contributions are not required to be equal. They are about what your child and you can afford together.
Install a habit of saving and practical concepts of investing
Saving is a difficult concept for a child, so you must teach them how to save. They can begin by saving 5-10 per cent of their monthly income. You can assist them in determining what they want to do with their savings. For example, if your child wants a video game, you can tell him how much he/she needs to save each month for 3-6 months in order to purchase it. This is referred to as goal-oriented saving. Teaching them how to apply concepts such as simple interest, compound interest, and so on.
Play Finance based games with them
Finance games are an enjoyable way to teach children about money. Although there is no stress of real money involved, the concepts and lessons learned through these games are very real. Monopoly, Cash Puzzler, Counting with Coins, and Wise Pockets are some games that can help children understand finances. You can look up these games online and decide which one is best for you and your children.
Open a bank account
Many banks are now offering debit cards for children and teenagers to use. You can open an account in these banks for your children and teach them how to use it. Operating their own bank accounts and comprehending concepts such as interest rates can help them prepare for a better future.
Have honest conversations about money
Try to have straightforward and honest conversations about money. Discuss how you save money and how you divide your pay checks with them. Try to keep conversations simple because we are also trying to shape their personalities around money, and the goal of this exercise is not to stress them out or teach them about abundance.
Read books that talk about finances for children with them
It is never a bad idea to read books about money. Books have the unique ability to enlighten. These books will also assist them in better organising their individual thoughts.
Some financial books for kids include:
- Rich Dad Poor Dad
- Psychology of Money
- The Richest Man in the Babylon
However, for parents educating their children about personal finance can be a time-consuming process. They need to put in the effort and consistently communicate a clear message about money, so that they will instil good habits in their children that will serve them well.