Money Matters for Children Too
Recently, in Warren Buffet's official Instagram, there was a poster about 6 skills that should be made mandatory in high schools- three of them were related to money. Our school curriculum misses out on teaching an important aspect of success in life despite all the skills or resources a child may be endowed. The 2008 global Financial Crisis, Tech Bubble of 2000 and several other recessions including the Great Depression of 1929 were caused to an extent by reckless investment in stock markets, greed and business losses due to unwise investments.
Robert Kiyosaki's bestseller Rich Dad Poor Dad pointed out the mindset problems our parents create in us that don't allow us to get rich even after working hard all our career and life. In a recent blog he wrote about how some people say, “I’d rather be happy than rich.” "I have been both rich and poor. In both situations, I was also both happy and unhappy at various times. I wonder why people think they have to choose between happiness and wealth," Kiyosaki points out.
The fact is that Money Management plays a major role in making us happy and rich as well and this makes it all the more important to provide Financial Literacy to our children. Financial Literacy is a life skill that is to be inculcated at a very early stage.
The first lessons of Financial Literacy should ideally be learnt from home itself. Parents should ensure they sit together and talk to children about money matters of the house and help them understand basic concepts.
However, parents often consider money matters a secret and keep it away from their children. Some parents find it difficult to explain the topic or are themselves confused about money management and there are also parents who think it is not a relevant topic at all.
Three ways to teach money skills at home:
1. Introduction to Currency– Knowledge about currency notes and its value denominations is the first step that parents can impart to children. The fact that different countries have different currencies is a General Knowledge topic. Parents should help kids to understand the basic concept of money and for what they can use the same.
2. First Shopping Experience– Parents should, irrespective of any convenience available, entrust children to do small shopping where they get to
• use the currency and buy items
• compare the products and the value
• select the right products within specified price range
• ask for invoices or bills from the shop
• calculate and ensure the right balance is received
The small experiences make them feel responsible and help the learn the basics of money management
3. Piggy Bank Savings – Pocket money, the very famous ritual that we see in most homes is considered to be the first assignment given to children to evaluate their behavior around money. Will they keep it safe, or spend unnecessarily or lend it to someone and so on and so forth.
Parents should show them the importance of savings, both long term and short term and instill a saving habit. Open bank accounts in their name and making them also know about it. Savings is no secret business. It is an essential habit that helps them get a financial security and independence.
The Role of Schools
Schools are the second important stakeholders in this journey of financial literacy among youngsters. It is high time that schools include the topic as part of the curriculum or as additional or supplementary topics. It is undoubtedly a pressing inclusion that will foster ethical and disciplined money management.
A well-crafted syllabus covering concepts like
Budget – Preparation of a budget is essential for a disciplined money management. Comparing them with actuals can help them understand where they went overboard in spending
Expenses – To know and understand common expenses in life like groceries and provisions, education, entertainment, medical needs, travelling expenses, mobile recharges, and so on. They also need to understand the value and changing priorities of expenses. Emergency and unpredicted expenditures are also to be factored in.
Savings – Systematic savings should form part of one’s life as a consistent habit. The need for such savings and the importance to plan expenses around the savings helps them prioritize their spending.
Small Investments – Knowledge about various investment methods and avenues. They should be taught about risks and rewards of saving and investments. Returns on Investments (ROI) and how to evaluate investments based on various factors including ROI will equip the young adults to plan their career and life well.
Continuous Learning – The schools should make financial literacy imparting interesting, fun, creative and continuous so as to make it irresistible to the students. Schools can use gamification to teach children money management skills such as Robert Kiyosaki’s Rich Dad’s Cashflow Board game that teaches how to earn passive income through real estate, stocks, companies and more. Schools can conduct activities that help the cause. A few can be on the following line
• Seminars and knowledge sessions
• Workshops on specific topics
• Simulations and role plays
• Practical Assignments
• Parents and Children Interactive sessions
• Fun and creative games or activities
Financial Statements – Concepts of Profit and Loss, Balance Sheet, Cash Flow Statements can be included as advanced topics for higher classes. These topics should not be limited to Commerce students but make it common so that the youngsters are seeded with basic concepts of money and business management that may be helpful in their future jobs and careers.
Schools can design their Financial Literacy context and design implementation with industry emulsion to create a real world connection for the children while they are still young enough to mould their perspectives on how to handle money to make their life financially secure.
Parents can contribute to this effort by talking to their children about such topics discussed in school and jointly learn and make it a practice at home as well. Being financially well planned and well-organized gives a sense of direction, happiness and a lot of confidence in chasing their dreams.
Parents can be proud that their children are self-made and they are aware of their responsibility around financial matters much early in their life.