Why do children need to be financially literate?
Certain communities in India are known for their business acumen. An excellent example would particularly include people and communities from the western part of the country, viz. the Gujaratis, the Marwaris, the Jains and the Kachchhis, to name a few. If you have friends from these communities, you would have noticed how much they value money. The importance of money is ingrained in them from their very childhood. They are taught how to manage money and are given the required training in their familial businesses from a young age. These children go on to become financially savvy adults.
This goes to show the importance of being financially literate and savvy from an early age. It is not challenging for children to understand the basic concepts of money management. Children are quicker than adults at picking up concepts. Moreover, they are already being taught basic arithmetic at school, which is required to understand concepts like earnings, spending, and savings. With appropriate training and exposure, they can be made financially literate and thus, we can ensure a bright future for them from a very young age.
Here are four money management concepts that can be taught to children
- The value for money
Children must learn that money has value, and that the moment it is spent, it is gone, and you lose that value. To demonstrate this, it would be best to take them grocery shopping. Since money is tangible, using cash would be prudent to teach them its value.
Children must learn the differences between necessary and frivolous expenditures. Learning the differences will help them realize that money should not be spent unnecessarily, but should rather be used as a means of fulfilling necessities.
By giving them allowances, parents can teach and make children capable of handling money independently. It is proposed that children below the age of ten should be given weekly allowances, pre-teens bi-weekly, while teens should be proffered a monthly allowance. The parent has to be particular about these allowances and not over allocate. Giving them allowances will help them learn the concepts of saving and especially spending within their allowances.
- Basics of banking
Taking children along on a visit to the bank will help parents teach them banking concepts in a live environment. While there, they can learn about depositing money, filling bank slips, withdrawals, savings account, interest rates, and checks, among other things.
Conclusively, when financial literacy is given the same importance as formal education, children become aware about the value of money. This way, they learn that money has to be earned. Children should not be under the impression that money magically flows out from the parents’ debit card. Financial literacy will teach them the correlation between working and earnings. From an early age, they will know that one needs to work to be able to earn money and thus, they will spend it wisely when the time comes. As they grow up, they will develop further insight on the importance of saving and investing. As adults, they will be able to categorize their money into essential spending, saving, and indulging, respectively.
As responsible adults, it will be easier for them to understand the concepts of the stock market. Investing in equity, debt, and other financial instruments will aid their budgeting and investing habits and subsequently, allow them to achieve and enjoy future goals in a systematic and planned manner.
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