7 Ways of Teaching Kids about Money - Money Management

During our stints of parenting, we all face several difficulties in teaching and discussing different aspects of growth phases with our children. Conversations related to adolescence, career choice, money management, and imparting the values that we want our children to learn are undoubtedly difficult, yet these are the factors that play significant roles in shaping the lives and careers of the kids.

Teaching kids to save money should start from an early age, as you can't accomplish it in a day. However, the biggest question that arises is when would be the right time to teach kids about money? It is apparent that you can't talk about money with your kids before they are six years old as they won't understand; however, don't overthink! Start it as soon as they enter that age bracket. During this age, the grasping power of kids remain high, and they start understanding basic mathematics. But remember that financial literacy can be a boring subject for kids to learn, so you need to adopt a few smart and playful techniques to make them understand the nuances of money management.So here we are with seven easy ways of financial literacy for kids:

Make Financial Literacy Enjoyable

• Since the time your kids start learning maths, teach them practically using coins. Coinciding finance with Math would be an interesting mode of teaching and children will adopt it quickly. It’s a great first step to initiate the learning process. You can also play field games with your kids to give them practical experiences of basic maths that we do in our daily life -- you can act as a shopkeeper, and they can be the buyers.  Explain the simple calculations of addition and subtraction that are required in shopping. After a few sessions of shopping simulation at home, send your child out to face the real world either at a store in your society or at any nearby shopping mart. Ask them to make a list of items that you want, then allocate a certain amount and explicitly instruct them about sticking to the list. To motivate them further, tell them that the amount they will bring back will go into their piggy bank.
  
  
• Take your kids for shopping and tell them what entails in your budget. Talk about the budget crunch and the exclusions; explain to them the reason behind it so that they may understand the significance of setting a budget. This way, they will also understand that their parents have certain limitations on their demands.
  
  
• Start playing board games such as Monopoly, Business Owner, Payday and Career with your kids while they grow up and make them co-relate these games to real-life situations -- being business owners, how can they utilize their money for opening more companies; when does the payday come for an employee and what are the necessary components of the salary; how to make clever financial deals, etc.

Ask Your Kids to Negotiate

The retail sector is getting more and more organized, leaving very little scope for negotiation during purchase. However, if you want your kids to learn to bargain, then send them to bring vegetables or fruits from the street hawkers. Ask them to check the price per kg before buying the items and then teach them to ask for discounts from the vendor on the asking price. It will be the first step towards learning negotiation. As the kids get into the habit of shopping often, they will get a rough idea about the market price of several items, based on which, negotiating with the hawkers for a better deal will become easier for them.

Teach Simple Budgeting to Kids Through Money Apps

You can also use apps like Savings Spree to make financial literacy for kids enjoyable. It also tests the financial knowledge of kids at each level. There is another app called Save! The Game that takes kids through the fantasy world in which they can collect money and avoid impulsive buys in the urge to save more.

Discuss Family Expenditures with Kids

Let your kids know about the significant expenses that you are planning to make. For instance, if you are buying a home, tell them how you are arranging the money through a home loan, the eligibility criteria, the percentage of the amount that you have put in a downpayment and the tenure of the repayment. Here, the purpose is not to put kids under any burden and financial insecurity but to make them realize that their parents are not inherently rich; in fact, they have worked hard to accomplish these life goals. Even if the kids do not understand the technicalities of the loan process, they will surely get a sense of responsibility that is required.

Let the Kids Plan for Family

If you are planning for a vacation, let your kids also know about it in advance. Ask them to make a list of their dream destinations, and the activities they want to include in the package. Then you can keep a piggy bank at home, label it as ‘Family Trip’ and ask your kids to put a certain amount from their monthly pocket money in the piggy bank for the family vacation. Also, inform them that you’ll take care of the remaining expenses. It will give them an exposure to saving money, teach them how to chip in for adventures and entertainment, and they will also rejoice in the feeling of being able to contribute to the family outing.

Teach Savings to Kids Through Money Goals

When you give pocket money to your kids, ask them to save 2% of it initially. After a point, when they accomplish the previous goal, ask them to save 5% and give it to you. You can also associate the savings goal with their unreasonable demands as well. For instance - if your kids are nagging you for something expensive, ask them to save money for it. This step will help them in two ways:

• They will not waste their entire pocket money.
• They will develop a habit to save.
  

It is one of the smart ways to save money by kids.

Allow Your Kids to Make Mistakes

Be prepared for the mistakes that your kids will make while performing the tasks that you have assigned to them. However, don't forget to correct them by explaining. Let’s consider an instance when the kids bargain with the vegetable vendor to such an extent that the vendor refuses to reduce the prices as he/she is not getting any margin. The kids might come back to you, disappointed as they’ve failed to negotiate. In such a scenario, ask them about the problems that they faced while bargaining and explain the reason why the vendor didn't agree to the price. It will help your kids understand the nuances of financial negotiation along with some basic mathematics.

Why is Financial Literacy Important for Children? - Financial Literacy

If you walk into any school, especially in India, the general emphasis is on three key subjects: English, Maths, and Science. These three subjects are considered to be fundamental in building the academic base and career of a child. However, stressing on particular subjects takes away the focus from other significant skills like speaking, adulting, basic life skills, and financial literacy. The last one is critical as it helps to mold the future of your child. However, before talking about the importance of financial literacy for children, let’s first look at what is meant by financial education.

What is Financial Literacy?

Financial education is the confluence of economic, credit and debt management, to make a financially informed decision that is integral to our everyday lives. Financial literacy in India includes the basic understanding of how to manage money, how a bank works, how to create a bank account, what is a credit card and how to avoid debt. In a nutshell, financial education helps us in making responsible, informed decisions that would have an immediate impact on our daily life.

The lack of financial literacy in India is prevalent all across the country. The problem is just not limited to emerging or developing countries irrespective of the class or landscape. The basic understanding of how to manage financial risks effectively and avoiding financial pitfalls can come in handy, and this needs to start early in life. Let's look at why understanding the importance of financial literacy is the need of the hour and should be instilled in every child.

Importance of Financial Literacy among Children

The lack of financial illiteracy can cost you heavily, and various factors also make financial decision-making a lot more difficult than ever. Five trends that are converging to demonstrate the importance of financial literacy guide are:

Lack of Confidence to Take a Firm Financial Decision

Consumers are now believed to be shouldering their financial decisions, and that is unsafe. Earlier, the past generations depended on pension plans to fund the rest of their retirement lives. However, the scene has completely changed as pensions are more of a rarity now than a norm, especially for the new generation. So, the lack of financial education can prove to be detrimental.

Complex Choices

As consumers, we are perpetually stuck in the horns of a dilemma on what to choose among various investment and savings schemes. All these plans offer varying interest rates and maturity benefits, and it needs a significant amount of financial literacy, to take the right decision. Moreover, such decisions can always impact your ability to buy a home, finance an education, or save for retirement and much more.

Longer Life Spans

With the advent of medical knowledge, we are living longer and better, which means that we need more money after retirement than what the prior generations did.

Changing Environment

The ever-changing financial landscape is very dynamic, as anything can influence you. Taken together, these factors can cause conflicting views and difficulty in creating, implementing and following a financial roadmap.

Spoilt with Choices

Banks, brokerage firms, insurance firms, credit card companies, mortgage companies, financial planners and other financial service companies are all vying for assets, creating confusion for the consumer.
How Can You Help Your Child by Building Financial Literacy in India?

Budgeting Skills

Although various factors such as income, social norms, and other behavioral biases influence people‘s expenditure, budgeting skills can save the day. Teaching your kid on how to budget from a very early age imparts a sense of financial awareness and responsibility to them.

Encourage Them to Save

Most of the people in India are unaware of how to save. Besides, they spend all, or most, of the money they earn each month on various consumer goods. There is a substantial societal and cultural pressure, including recurring advertising and discounts by companies, that have significantly contributed to the spending habits of Indians. Encouraging your kids to save each penny will help them understand finance. Setting goals that your kid's desire, giving pocket money for chores, and asking them to write down their expenditure can promote good saving habits and also help spread financial literacy in India.

Monetary Independence

Most of the Indian youth fail to understand the very aspect of independence as they are dependent on their parents at least until they are 24 years of age. Ensuring financial independence for your child is crucial as it will prepare them for today's cut-throat world. Teaching them about the basics of debit over credit will provide a sound financial grounding later in their life and also offer a robust financial literacy guide.

Teaching Kids About Money - 7 Ways of Teaching Kids about Money

During our stints of parenting, we all face several difficulties in teaching and discussing different aspects of growth phases with our children. Conversations related to adolescence, career choice, money management, and imparting the values that we want our children to learn are undoubtedly difficult, yet these are the factors that play significant roles in shaping the lives and careers of the kids.

Teaching kids to save money should start from an early age, as you can't accomplish it in a day. However, the biggest question that arises is when would be the right time to teach kids about money? It is apparent that you can't talk about money with your kids before they are six years old as they won't understand; however, don't overthink! Start it as soon as they enter that age bracket. During this age, the grasping power of kids remain high, and they start understanding basic mathematics. But remember that financial literacy can be a boring subject for kids to learn, so you need to adopt a few smart and playful techniques to make them understand the nuances of money management.  So here we are with seven easy ways of financial literacy for kids:

Make Financial Literacy Enjoyable

1. Since the time your kids start learning maths, teach them practically using coins. Coinciding finance with Math would be an interesting mode of teaching and children will adopt it quickly. It’s a great first step to initiate the learning process. You can also play field games with your kids to give them practical experiences of basic maths that we do in our daily life -- you can act as a shopkeeper, and they can be the buyers.  Explain the simple calculations of addition and subtraction that are required in shopping. After a few sessions of shopping simulation at home, send your child out to face the real world either at a store in your society or at any nearby shopping mart. Ask them to make a list of items that you want, then allocate a certain amount and explicitly instruct them about sticking to the list. To motivate them further, tell them that the amount they will bring back will go into their piggy bank.
2. Take your kids for shopping and tell them what entails in your budget. Talk about the budget crunch and the exclusions; explain to them the reason behind it so that they may understand the significance of setting a budget. This way, they will also understand that their parents have certain limitations on their demands.
3. Start playing board games such as Monopoly, Business Owner, Payday and Career with your kids while they grow up and make them co-relate these games to real-life situations -- being business owners, how can they utilize their money for opening more companies; when does the payday come for an employee and what are the necessary components of the salary; how to make clever financial deals, etc.

Ask Your Kids to Negotiate

The retail sector is getting more and more organized, leaving very little scope for negotiation during purchase. However, if you want your kids to learn to bargain, then send them to bring vegetables or fruits from the street hawkers. Ask them to check the price per kg before buying the items and then teach them to ask for discounts from the vendor on the asking price. It will be the first step towards learning negotiation. As the kids get into the habit of shopping often, they will get a rough idea about the market price of several items, based on which, negotiating with the hawkers for a better deal will become easier for them.

Teach Simple Budgeting to Kids Through Money Apps

You can also use apps like Savings Spree to make financial literacy for kids enjoyable. It also tests the financial knowledge of kids at each level. There is another app called Save! The Game that takes kids through the fantasy world in which they can collect money and avoid impulsive buys in the urge to save more.

Discuss Family Expenditures with Kids

Let your kids know about the significant expenses that you are planning to make. For instance, if you are buying a home, tell them how you are arranging the money through a home loan, the eligibility criteria, the percentage of the amount that you have put in a downpayment and the tenure of the repayment. Here, the purpose is not to put kids under any burden and financial insecurity but to make them realize that their parents are not inherently rich; in fact, they have worked hard to accomplish these life goals. Even if the kids do not understand the technicalities of the loan process, they will surely get a sense of responsibility that is required.

Let the Kids Plan for Family

If you are planning for a vacation, let your kids also know about it in advance. Ask them to make a list of their dream destinations, and the activities they want to include in the package. Then you can keep a piggy bank at home, label it as ‘Family Trip’ and ask your kids to put a certain amount from their monthly pocket money in the piggy bank for the family vacation. Also, inform them that you’ll take care of the remaining expenses. It will give them an exposure to saving money, teach them how to chip in for adventures and entertainment, and they will also rejoice in the feeling of being able to contribute to the family outing.

Teach Savings to Kids Through Money Goals

When you give pocket money to your kids, ask them to save 2% of it initially. After a point, when they accomplish the previous goal, ask them to save 5% and give it to you. You can also associate the savings goal with their unreasonable demands as well. For instance - if your kids are nagging you for something expensive, ask them to save money for it. This step will help them in two ways:

1. They will not waste their entire pocket money.
2. They will develop a habit to save.
   

It is one of the smart ways to save money by kids.

Allow Your Kids to Make Mistakes

Be prepared for the mistakes that your kids will make while performing the tasks that you have assigned to them. However, don't forget to correct them by explaining. Let’s consider an instance when the kids bargain with the vegetable vendor to such an extent that the vendor refuses to reduce the prices as he/she is not getting any margin. The kids might come back to you, disappointed as they’ve failed to negotiate. In such a scenario, ask them about the problems that they faced while bargaining and explain the reason why the vendor didn't agree to the price. It will help your kids understand the nuances of financial negotiation along with some basic mathematics.

Why is Financial Literacy Important for Children?

 What is Financial Literacy?

Financial education is the confluence of economic, credit and debt management, to make a financially informed decision that is integral to our everyday lives. Financial literacy in India includes the basic understanding of how to manage money, how a bank works, how to create a bank account, what is a credit card and how to avoid debt. In a nutshell, financial education helps us in making responsible, informed decisions that would have an immediate impact on our daily life.

The lack of financial literacy in India is prevalent all across the country. The problem is just not limited to emerging or developing countries irrespective of the class or landscape. The basic understanding of how to manage financial risks effectively and avoiding financial pitfalls can come in handy, and this needs to start early in life. Let's look at why understanding the importance of financial literacy is the need of the hour and should be instilled in every child.
Importance of Financial Literacy among Children

The lack of financial illiteracy can cost you heavily, and various factors also make financial decision-making a lot more difficult than ever. Five trends that are converging to demonstrate the importance of financial literacy guide are:

Lack of Confidence to Take a Firm Financial Decision

Consumers are now believed to be shouldering their financial decisions, and that is unsafe. Earlier, the past generations depended on pension plans to fund the rest of their retirement lives. However, the scene has completely changed as pensions are more of a rarity now than a norm, especially for the new generation. So, the lack of financial education can prove to be detrimental.

Complex Choices

As consumers, we are perpetually stuck in the horns of a dilemma on what to choose among various investment and savings schemes. All these plans offer varying interest rates and maturity benefits, and it needs a significant amount of financial literacy, to take the right decision. Moreover, such decisions can always impact your ability to buy a home, finance an education, or save for retirement and much more.

Longer Life Spans

With the advent of medical knowledge, we are living longer and better, which means that we need more money after retirement than what the prior generations did.

Changing Environment

The ever-changing financial landscape is very dynamic, as anything can influence you. Taken together, these factors can cause conflicting views and difficulty in creating, implementing and following a financial roadmap.

Spoilt with Choices

Banks, brokerage firms, insurance firms, credit card companies, mortgage companies, financial planners and other financial service companies are all vying for assets, creating confusion for the consumer.
How Can You Help Your Child by Building Financial Literacy in India?

Budgeting Skills

Although various factors such as income, social norms, and other behavioral biases influence people‘s expenditure, budgeting skills can save the day. Teaching your kid on how to budget from a very early age imparts a sense of financial awareness and responsibility to them.

Encourage Them to Save

Most of the people in India are unaware of how to save. Besides, they spend all, or most, of the money they earn each month on various consumer goods. There is a substantial societal and cultural pressure, including recurring advertising and discounts by companies, that have significantly contributed to the spending habits of Indians. Encouraging your kids to save each penny will help them understand finance. Setting goals that your kid's desire, giving pocket money for chores, and asking them to write down their expenditure can promote good saving habits and also help spread financial literacy in India.

Monetary Independence

Most of the Indian youth fail to understand the very aspect of independence as they are dependent on their parents at least until they are 24 years of age. Ensuring financial independence for your child is crucial as it will prepare them for today's cut-throat world. Teaching them about the basics of debit over credit will provide a sound financial grounding later in their life and also offer a robust financial literacy guide.