Advertisement

BW Businessworld

Teach Your Child What Really Counts

The best way to teach kids about money is to let them deal with money early on

If you want your children to inherit true wealth, make them financially literate

I like this quote by American columnist Bob Talbert: “Teaching kids to count is fine but teaching them what counts is best.” The quote is pithy but it gets to the core of teaching fiscal responsibility.

What parents forget

If you look around, parents and teachers focus a lot on teaching mathematics—they send kids to Vedic Maths and Abacus classes to enable them to have numbers at their fingertips from a young age.

Parents also enrol their kids in drama, dance, singing, karate and other classes. But how many of us actually remember that when our kids enter the real world, the first thing they will confront is money?

Amidst all the classes, we forget an important life skill—financial literacy. Many of us probably pay our children pocket money but we don’t realise that this is not teaching them about the value of money or how to manage it. Some schools touch upon economics or basic finance courses, however, no school is equipped to analytically teach financial literacy to your kids.

What exactly is financial literacy?

  • It means understanding:
  • Income, expenses and savings
  • Budgets
  • Assets—real and financial—and liabilities
  • Risk management, insurance and its purpose
  • Investments and how to make money work for you
  • Taxation
  • How to handle situations such as disability, starting a business, inheritance
  • Wills, trusts, and inter-generational wealth transfer.

Money lessons at home

Most parents might touch on the concept of piggy banks and savings early on, but are usually reluctant to discuss the topic of money and family finances with their children.

In the Indian context, money is a touchy issue and in terms of discussing sensitive topics, ranks as high as sex education. Thus, it’s not surprising that most parents are loath to discuss it.

The earlier the better

The best way to teach kids about money is to let them deal with money early on. This is because as kids grow into teenagers they develop strong habits, which become hardwired because of peer pressure and the external environment.

This particularly happens beyond the 6th grade, when children face severe peer pressure. They want to buy gadgets, branded clothes and do many things that their friends are doing. Telling them to act sensibly and responsibly at this age might be a tall order if you have not inculcated good habits early on.

They need to understand the power of money and the consequences of their decisions. It’s far better that they commit mistakes at a young age with smaller amounts than commit financial blunders when they grow up. They will thus experience handling their own money and making decisions around it. I believe this is a strong competitive edge that you can give your children for their future financial success.

When’s a good time?

In my experience, kids between the age of 5 and 12 are receptive to financial literacy. Hence, it is best to start between 5 – 12 years of age. This is not to say that children above 12 do not appreciate financial literacy.

They certainly do, when the content is interesting, but it takes a little more time for them to understand the importance because they develop certain habits and are consumers by then. There will be constant demands, or emotional blackmail that most parents will be exposed to at some point of time.

You must understand that it’s natural for them to sometimes behave like this and is a part of growing up. The best part is that you can still teach them to be savvy savers, spenders, investors and givers.

Money lessons for kids

Common sense and some practical ideas are all you need to have to start teaching your children about money. The key learning points for kids should be:

Having healthy values about money

Setting goals and priorities

Thinking and making prudent choices

Not living for the weekend: delay instant gratification

Understanding the virtues of hard work.

The ‘how’ part

There are often many real-life situations when you can teach your kids about money, considering that money is an integral part of our daily life.

Any time: Whenever you buy groceries or petrol or even pay school fees, you can teach children. If you have taken your son to an ATM, and he insists on pressing all the buttons like most kids, take this opportunity to discuss a few points about ATMs.

Special time: You can always set aside time to teach them the basics of money management. If you cannot, then you must seek professional help. It is far better to spend some money on financial education than allowing your children to develop irresponsible and dangerous money attitudes, behaviours and habits.

Finally, it is the parents’ responsibility to control what children buy and how much they spend. If parents fail in this critical test, no amount of money will be enough for their kids to spend when they grow up.

We must realise that it is our mistake when we rush off to dress them in so-called designer outfits or spend several lakhs or thousands on their birthday parties without giving an iota of thought on the impact this has on the children’s minds.

Don’t forget that even though you might not be teaching your kids directly, they are constantly learning by just observing you.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Tags assigned to this article:
children taxation literacy money


Amar Pandit

Mr. Amar Pandit is an electronics engineer, who started working with TCS. Later he moved to the US, post TCS, and started working with Infrasoft Technologies. He is one of the top most practicing Certified Financial Planners in the Country and is a member of Financial Planning Standards Board, India and Financial Planning Association, USA. In March 2015, Amar founded My Life… Happily Documented, an enterprise which enables families to keep their confidential and other important documents safe and easily accessible using technology.

More From The Author >>
sentifi.com

Top themes and market attention on:


Advertisement