Our Kids and the financial world
Today is the Children’s day 14th November 2018 and the right day to discuss on how to start teaching our kids to manage money.
According to a study by University of Cambridge, Kids form their money habits as early as when they are 7 years old. The young and observant minds watch your each action and record your decisions on money.
You can give your kids a financial head start by teaching them to understand money from an early age
Following are the basic points which every parent should keep in mind and teach their younger ones.
Teach them to Differentiate between Needs and Wants
It is necessary you teach your children to distinguish between what is necessary and what is just nice to have. This is will make a foundation for making Good Financial Decisions.
Take some time to discuss with them why one should not make impulsive spending versus the planned purchases. Give them examples of how you saved money by not buying an item which was attractive but not of much use.
Show them the way from Saving to Investment
Start with small amounts of pocket money & guide them how they can open a Savings Account and earn money on the money saved.
Once your children have understood the banking transactions, encourage them to learn about mutual funds and stock markets. Guide your children to explore appropriate options available.
Saving is a natural occurrence, but investment is a conscious activity. Show them the way to channel their savings to investment, so as to have a higher potential to grow and multiply over time.
Time Helps Money Grow
Money has a time value and is one of the most important lessons of Financial Literacy.
The underlying principle of Time Value is that a Rupee in your hand today is worth more than a Rupee you will receive in the future because a Rupee in hand today can be invested to turn into more money in the future.
Show them how credit works
Children need to understand that credit means borrowing from others and it comes at a cost. However, they also need to be taught that credit can be a valuable tool, if used responsibly
Inculcate Reading Habit in your Child at an early age
Reading as a Habit has many benefits. Reading boosts creativity and imagination in children.
As we do not have financial literacy in our schools, we have to put in some extra effort to make our children financially literate.
Make a habit that your child knows the headlines of the Financial Dailies. The Financial Industry is constantly changing, new products, new markets & new ways to save and invest money. Do make a habit of keeping in touch with the latest developments in the financial world by reading newspapers and books.
Teaching your children the world of finance starts with you. The learning will not end in a discussion or two; you will have to answer many questions of the young minds throughout the days, weeks and years. After some years you would be glad, your financially literate child grew into a financially responsible adult.