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Importance of building life-long money habits early in life

Importance of building life-long money habits early in life

Importance of building life-long money habits early in life
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By CNBCTV18.com Contributor Oct 10, 2022 1:42:37 PM IST (Updated)

In a country like ours, financial literacy is one of the biggest assets we can empower the growing middle class with. And I cannot emphasise this enough - we cannot wait until kids are ‘grown up’ to start the journey.

I recently read something that made my heart sink a little. According to recent data shared by the RBI, Indians lost Rs 100 crore daily to bank fraud or scams… For the last 7 years!

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Worse, 74 percent of those scammed never recovered their lost money. About a third of these people stored sensitive financial information such as bank account details, debit or credit card pins, ATM passwords, Aadhaar and PAN details on email or computer, almost 30 percent admitted that they’d shared their passwords and PINs with family members, and about 4 percent had even shared it with their domestic and office staff!
These revelations are startling, to say the least. But they’re also indicative of a larger reality. That Indian adults show a surprising lack of financial knowledge. So what’s the solution? To my mind, beginning early and learning thoroughly!
What is the right age to teach your kids about money? How young is too young to educate them about the importance of being financially independent? Tell them about budgeting and saving? I get asked these questions way too many times. My answer? The earlier, the better.
Most Indian parents baulk at the idea of discussing money and financial matters with their children. Just over a decade back, financial or money management for kids was mostly restricted to receiving one’s monthly allowance or “pocket money” and saving it in a piggy bank, to be used for that birthday treat or to buy that latest toy in the market. While this would often help inculcate a habit of saving in young kids, it was rarely followed up with concrete lessons in financial planning as they grew up. As a result, a majority of Indians remain clueless about the benefits of investing, power of compounding and the best ways to invest and grow their money.
A lowly 27 percent of Indian adults - and 24 percent of women - meet the minimum level of financial literacy as defined by the Reserve Bank of India. This figure is abysmally low when compared to countries like the US (57 percent), the UK (67 percent) and Singapore (59 percent). With school and college curriculum not contributing much to financial literacy, the onus of imparting financial education often lies with the parents or guardians.
Moreover, with the onslaught of technology, today’s kids, or digital natives, as they are otherwise called, have a lot more avenues to spend, or perhaps, even overspend their monthly allowances on. And therefore, inculcating healthy money habits early on in life becomes rather imperative.
Typically, attitudes towards money are already developed by the age of seven.
So, beginning as early as five or six years old can go a long way in helping shape your child into a responsible and financially independent adult. With kids spending a majority of their time online - for learning, playing, entertainment and even shopping , especially post the pandemic, financial literacy is no longer a luxury, but has become a necessity.
Needless to say, good money habits not only put a person in control of your finances - giving you the freedom to use your money when and where you actually need it - education, healthcare, housing, retirement and more - but also enable them to have a financially-secure and independent future. With only less than a third of the population of India being financially literate, many remain unaware about the available sources of debt and resort to informal means, exposing themselves to loan sharks and endless cycles of debt. This not only negatively impacts an individual but also hampers economic growth in the country, in the long run.
In a country like ours, financial literacy is one of the biggest assets we can empower the growing middle class with. And I cannot emphasise this enough - we cannot wait until kids are ‘grown up’ to start the journey.
Parents can start with simple steps to teach their children about saving and spending money prudently. Giving pocket money from a young age and making kids largely accountable for their own expenses can help keep a check on their buying and saving habits. Acquainting young kids with the cost of things and simplifying concepts like inflation for them can go a long way in understanding the value of money. This can also be done through different online and board-games such as Monopoly.
Parents should also introduce their children to the benefits of investing and perhaps even set up a bank account or an investment scheme early on in life. Teach by example - show them how it is done.
Huge strides in technology have completely transformed the way we deal with money and transact in our everyday lives. With the rising popularity of digital wallets, UPI, cryptocurrency and other digital currencies, traditional methods of transactions have become rather redundant. As a parent, one of the most important life skills that you can empower your kids with are inculcating in them healthy money habits and equipping them with the latest financial knowledge.
And sometimes these lessons are best learnt in simulated environments under the supervision of trained, certified and experienced professionals, using ever-evolving curricula that uses age-appropriate projects, games, activities and simulations around modern money topics such as FinTech, Cryptocurrency, DeFi, Metanomics, Investment Instruments such as Shares-Bonds, Index Funds, REITs etc. At least, that’s how we do things at Education10x.
The importance of trained professionals is further underlined in the importance of teaching kids about financial crises and how to go about handling one. As a parent, it is understandable that your natural inclination is to protect your kids from the harsh realities of the world outside. But then, would you rather that your kid be equipped with the tools to manage a crisis, or be blindsided by it and fumble through it as an adult?
The world we’re living in today is evolving at a pace that makes predicting the future virtually impossible. Our kids are going to inherit this world. The most important thing we can do for them is give them the tools that will help them not just survive, but thrive in an unpredictable future!
The author, Gyan Tiwari, is Founder at Education10x. The views expressed are personal
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