February 25, 2021 12:17:50 pm
By Sachin Ravi and Raghav Chakravarthy
Schools, organisations and educators around the world believe that helping children and teenagers learn the basics of free markets, entrepreneurship, spending, saving, and investing is one of the most important, yet usually neglected components of a child’s education.
Research conducted in the University of Cambridge suggests that your child’s financial habits are typically set by the age of seven, which is an incredibly young age by any standard. Just as learning how to communicate in English is an essential skill today, so is financial language an equally important aspect of effective holistic education.
It is an undisputed fact that all of our children will someday make basic financial decisions in their lives, and if we miss this opportunity to teach them financial literacy, we’re hurting their ability to be successful in the future.
Though there are several programmes and courses available for kids to learn about money and business, typically these are not included in the regular curriculum of schools, and rarely are kids taught about the practical applications. In such cases, it is the responsibility of a parent to take the initiative and enroll their child in financial literacy programmes.
Here are a few ways in which parents can start inculcating habits of financial literacy, right from home!
Distinguish between wants and needs
Teach children to understand the difference between things they ‘need’, compared to things they ‘want’, as it will help them make value judgments about their expenditure in the future. Knowing when not to spend money is a crucial aspect of managing one’s finances.
Give them opportunities to earn and spend
Give kids opportunities around the house to finish chores and ‘earn’ some pocket money, likewise, also create opportunities for them to ‘spend’ their hard-earned allowance. Allowing children to earn money provides them with the opportunity to learn how to use it. When you offer pocket money in exchange for household chores, they’re also learning the value of their hard work.
Gradually introduce topics of financial literacy
One mistake that parents often make is trying to teach their kids everything there is to know about finances at one go. Financial education is vast and covers many different topics; therefore, it is important to introduce these topics to kids slowly so that they fully understand each one before moving on. Introducing all concepts in one lesson might overwhelm kids and often they will not remember much of what was discussed. Hence, it is ideal to space it out over several smaller lessons
Demonstrate the importance of savings
Demonstrate the importance of saving to kids, by having them save up a part of their allowance every month, in order to buy something that they want. Teach them the value of frugality, and the dangers of impulsive spending, and also reinforce the fact that debt of any sort is a bad idea. This will help them understand the implications of leveraging credit cards and easy money.
Teach them how to track their expenditure
Emphasise on the importance of tracking one’s expenditure, and having children keep a weekly account of where they spend their money, tabulating it at the end of the month will surely be an eye-opening experience for them. A crucial part of being better at saving includes knowing where your money is going. Encourage children to think about how they’re spending and how much faster they could reach their savings goal if they were to change their spending patterns.
In addition to these few methods, parents should also try and be open about their financial decisions and should bring it up during normal discussions with their kids. They could also promote participation in financial quizzes and competitions to ensure that their child is never bored by the prospect of financial literacy!
(The writers are Co-founders of QShala)
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