{"id":9660,"date":"2024-11-05T12:10:30","date_gmt":"2024-11-05T12:10:30","guid":{"rendered":"https:\/\/www.smilefoundationindia.org\/blog\/?p=9660"},"modified":"2024-11-08T08:42:28","modified_gmt":"2024-11-08T08:42:28","slug":"make-children-money-wise-empower-the-younger-generation","status":"publish","type":"post","link":"https:\/\/www.smilefoundationindia.org\/blog\/make-children-money-wise-empower-the-younger-generation\/","title":{"rendered":"Make Children Money-Wise, Empower the Younger Generation"},"content":{"rendered":"\n

When her son was five years old, Neelima Menon got her son a piggy bank. \u201cWhenever our relatives visited us, they would give him money. We taught him to put it into the piggy bank and use it to buy any new toy he wanted. That introduced him to the concept of budgeting and saving,\u201d says Neelam, a 35-year-old IT professional.<\/p>\n\n\n\n

\u201cNow he is 15 years old, and my husband is teaching him about investing in the stock market. \u201cWe believe financial literacy is very important. It is a life skill and should ideally be taught in schools,\u201d says the Bengaluru resident.<\/p>\n\n\n\n

What is financial literacy?<\/strong><\/h2>\n\n\n\n

Financial literacy is the ability to understand and effectively manage personal finances and make informed financial decisions by understanding and using financial concepts and skills. This includes budgeting, saving, investing, debt management, understanding of financial products and financial planning. <\/p>\n\n\n\n

Importance of being financially literate<\/strong><\/h3>\n\n\n\n

According to an article in India Today<\/em>, 76% of the Indian population is financially illiterate and only 4.2% possess advanced financial knowledge. A large portion of the population is vulnerable to financial pitfalls, including crippling debt and underinvestment in wealth-building opportunities. That\u2019s why financial literacy is important for everyone, regardless of age, educational background or income level.<\/p>\n\n\n\n

\u201cIt is important to teach your children financial literacy. They need to know the value of money and learn to differentiate between needs and wants,\u201d says psychologist Mini Rao. \u201cNeeds, their parents will provide for since it’s a necessity, but for wants which is a luxury, they have to save up for it.\u201d<\/p>\n\n\n\n

Benefits of introducing children to the world of finance<\/strong><\/h2>\n\n\n\n

Early financial education<\/a> helps to inculcate good money management habits, promotes responsible spending and saving, and prepares children to shoulder future financial responsibilities. Teaching children budgeting, saving, investing and the value of money will help them recognise and avoid common financial pitfalls, understand the consequences of impulsive spending, accumulating debt, etc.<\/p>\n\n\n\n

They will be better equipped to set and meet long-term financial goals regarding higher education, home ownership and planning for retirement.<\/p>\n\n\n\n

\u201cWhen I first began working, I thought my life was settled as I was earning a salary. I didn\u2019t realise that 3% to 5% salary growth isn\u2019t enough to manage in the world. The reality hit me only years later, so I want my son to learn financial management early on,\u201d says financial coach and licensed insurance advisor Muthu Kishor. <\/p>\n\n\n\n

Catch them young<\/strong><\/h2>\n\n\n\n

According to research done by Cambridge University, our approach to money is set by the age of seven. Behaviour experts David Whitebread and Sue Bingham of the University of Cambridge reviewed previous studies to determine how children learn in general and how they learn about money in particular. They concluded that money habits \u2014 including the ability to plan ahead and to delay gratification \u2014 are typically formed early in childhood. The 2013 study found that most people\u2019s money habits are formed from zero to seven years of age<\/a>.<\/p>\n\n\n\n

While it doesn\u2019t mean that if you have missed that window period, it is too late, it\u2019s always better to teach financial concepts at a young age.<\/p>\n\n\n\n

Ways to teach children about money<\/strong><\/h2>\n\n\n\n

Here are some age-appropriate ways in which you can teach children about finance.<\/p>\n\n\n\n