Before starting this article, I want to ask you two simple questions. My first question "Are you educated? I know your answer-Of course I am educated. Now it's time for my second question. Are you financially literate? Think about it for a while before giving any answer.
I am sure you must have seen many people around you who are earning well but still they are not financially stable. Reason being they do not understand their relationship with Money. Financial literacy is the understanding your relationship with money. It is your ability to manage money. Just look around and you will find many people who have spent their entire life working and earning money but at their old age they are dependent on their children. This is because they have not made any financial plan for themselves. But do not get confused here financial planning does not mean saving. There is difference between saving and investing. At a NSE event to commence the World Investor Week, GP Garg, executive director, Securities and Exchange Board of India (SEBI), said, "In a country like India we have close to 80% literacy, but when it comes to financial literacy we are not that lucky. As per survey conducted by National Centre for Financial Education only 27% of Indians are financially literate. In this article I am going to focus about financial literacy for kids.
Why Financial Literacy is important for Kids?
Like bad habits, good habits are also learnt early. Good money habits are no exception. When you inculcate financial literacy in kids at a young age, they end up becoming financially responsible adults and able to take their financial decisions wisely. If your child is financially literate you can spend your retirement with peace as they will not be dependent on your money.
Have you ever thought why our kids are not financially literate?
First reason - Parents
We often hear people saying don't talk about money in front of children. Don't discuss your finance in front of children. This is our biggest mistake. Parents want their kids to learn everything, then how can we leave such an important aspect of life? This is one skill which we must teach to our children, so that when they grow up they will be more independent, successful and happier. Kids should understand importance of money from their childhood. Being a parent, it is your responsibility to teach finance lessons to your kids.
Second Reason - School
Our education system is based on exams not on learning. I often feel that we study for exam not for knowledge. Schools do not consider personal finance as an important subject. Their teachers are not qualified to teach this subject. Parents think that child will learn everything in school and schools feel that personal finance should be thought by parents.
Now as we have understood reason for financial illiteracy, let us know think about
Solution to this problem
- Talk about money with your child. Let them ask you questions about money.
- We are living in a digital world. Our kids have access to technology. There are many fun based games that can teach your kids about money. Play those games with them.
- Tell stories of successful businessman so that they can get some motivation from them. It will also develop entrepreneurial skill among kids. You can make your own imaginary story with some element of financial education. Believe me kids will love to hear such stories.
- Stop giving pocket money to your kids. They should understand that money does not come from pocket of parents, they have to earn it. Give small jobs to your child like cleaning room, washing your car etc. Pay them on completion on these tasks.
- Teach importance of charity to your kids. Ask them to donate certain percentage of their money. Giving charity does not decrease wealth.
- Teach them difference between saving and investment.
- Schools should also include personal finance as compulsory subject. Some schools are now moving in this direction.
- Once they reach teenage give them money to manage household expenses at least once in a year. They can learn planning and budgeting with the help of this task. Let them fail. Failure is first step to success.
- Last but not the least, kids learn from what they see. They learn by observing adults.
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