You must have heard of the famous saying by Oscar Wilde "When I Was Young I Thought That Money Was The Most Important Thing In Life, Now That I Am Old I Know It Is". Doesn’t this imply that you should start young in order to understand finance and set your financial goals in life?. "If There Were No Clouds None Would Enjoy Sunshine". However difficult it might be it is very important to teach your kids how to make their own financial decisions early on in life as this prepares them for the challenges they would encounter later on in life. You might have discussed many topics with your children such as matters pertaining to health, safety, smoking and alcoholic abuse and so on. However, finance and handling of money is still considered as Taboo in many parts of our country. I would like to remind all of you that the team of Financial Planners at IndianMoney.com are always there for you to plan your financial needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 022 6181 6111.
Why Do Children Need To Be Taught How To Use Money
Credit Cards And Debt
You live in a digital age where mass media such as television, internet, mobile phones rule the roost. Young children are exposed to advertisements and since marketing agents know that children are the "Weak Link In The Chain"
they are specifically targeted. You find your child demanding a certain brand of chocolates just because his favorite cartoon character endorses it. As the child grows older he is subject to peer pressure and he wants bikes and more costly electronic items. Credit card advertisements lure him to purchase these items on credit. Children spend in Malls and for online purchases .Credit card companies know this and specifically target young adolescent’s .Not before long the child is in debt and does not know how to handle it. He may be brilliant in his studies but is found wanting in financial decision making. Adolescents spend thousands of rupees online and since they cannot pay by cash they will reach for that credit card
. This teaches them a culture of debt."You Cannot Afford That Costly Laptop,No Problem Buy Now Pay Later, Just Swipe That Card"
More and more college students have credit cards and before they can even realize what is happening they are soon in debt and ruin their credit scores.
Are You Setting A Bad Example
Are you sitting down at the beginning of each month and making that monthly budget?.If you are then be sure your kids are learning from you. What if you are not preparing that monthly budget? Children learn
by observing and how would they learn anything in this case when they lack proper guidance. What do you do when you run out of finances?
Do you borrow money from family and friends? .Beware that your children are watching you and they too would come to the conclusion that borrowing money from friends is the best way to meet their financial needs .Let us consider that you are depressed or sad. What would you do now?. Would you go on a shopping spree?
. Children do not listen to what you say. "They Do What You Do"
. Have you lost heavily in business?. Do you still buy that new car in order to keep up appearances?.You must not fall for this "Burying Your Head In The Sand "
approach and tighten your spending. This teaches your children what to do in an economic downturn or on the loss of a job"The Real Price Of Everything Is The Toil And Trouble Of Acquiring It"
Understanding The Value Of Money
No matter how rich you are your child needs to study about the value of money. You can start by giving him pocket money.S ee how he would spend it. Does your child splurge on clothes and toys as per his whims and fancies? Teach him the value of money. In countries such as USA and UK children learn about money at an early age. They are encouraged to take up part-time employment during their schooling days. A person who works hard knows the value of money and even if he is a child he will not waste his hard earned money. Later on in life these lessons learnt teaches these children how to be spend thrifty. Many of the Princes of the Royal Family in Britain serve in the Royal Air Force or the Army. In spite of being born in luxury the early lessons learned in life and spending their childhood years working in gardens and farms and youth days in the army prepares them for the financial challenges in life. Would You Let Your Child Work For Someone Especially If You Are A Rich Businessman In India? .How Would Your Child Learn Anything At All If He Is Not Taught Finance And How To Save Money?.Sadly our culture does not encourage our children to learn anything about finance and the hardships faced in life due to making the wrong financial decisions. It would be wise to remember the saying "If We Command Our Wealth We Will Be Rich And Free" .If Our Wealth Commands Us We Are Poor Indeed".
How Would You Teach Your Child To Make The Right Financial Decisions?
Hands On Experience
Mr Ramesh is a highly successful stockbroker. He wants to educate his son on the benefits and perils of investing in the stock market. Mr Ramesh after much thought hit upon a plan .He bought a share each of five different blue chip Indian companies as a birthday present for his sixteen year old son. This aroused the curiosity and questioning spirit in his son who wanted to learn all about finance and the stock market. The Objective was achieved .The son is now a highly successful stock broker. Mr Rajesh is a highly successful businessman. His daughter Nisha who is studying in college was a great fan of airlines and airline industries. She believed that by investing only in shares of airline industries she would make huge sums of money. Mr Rajesh was worried that his daughter’s obsession in the airlines sector would cause her huge financial losses later on in life. He wanted to teach her the benefits of diversification. Mr Rajesh hit upon a plan. He invested INR 50000 in shares by splitting it up into two parts. One half or a sum of INR 25000 he invested in his daughters name by opening for her a demat account He invested the entire sum in companies of the airlines industry. He invested the other half of the sum of INR 25000 in his name. He invested this amount in the FMCG , Information Technology, Pharma and Oil and Gas sectors. He compared the returns of the two accounts after a period of 6 months .This was during the time when the airline industry was in the doldrums in the year 2011 and airlines had incurred huge financial losses .The Pharma sector and FMCG sector had performed exceptionally well and this was reflected in the returns earned by Mr Rajesh. Consequently as the airline sector had performed very badly the investment of Nisha reflected huge losses. Nisha learnt from this mistake and now has a diversified portfolio of stocks .She also learned that stock markets can be very volatile and one can suffer huge losses in a matter of months."Invest In Yourself .Your Career Is The Engine Of Your Wealth".
Encourage The Entrepreneur In Your Child
Every parent wants his or her child to be a highly successful Entrepreneur .Running a business can be a tedious affair both in terms of money and time. So how would you teach your child how to become a successful entrepreneur and make strong financial decisions himself?. I was reading the newspaper the other day when I came across a unique case of a 13 year old schoolgirl from Gurgaon. In her school she had read about a number of deaths in India due to diarrhea. An effective way to combat diarrhea is through ORS. But how to find the portable water necessary to administer ORS. This was the dilemma the 13 year old faced. Aarushi sat with her neighbor a computer designer and designed a prototype a recyclable tetra pack of a particular design. The package contains both 350 ml of clean water and 50 ml of medicinal fluid. An inlet can be flipped open to add the ORS .The packet can be shaken and a safe solution could be administered to children even in the remotest parts of the country .Truly the mark of a great entrepreneur. Our children learn by watching us and if you see your child showing great interest when you discuss that business plan it makes you wonder whether the Entrepreneur spirit exists in him.
Teach Him To Think For Himself
- Teach your child the value of money. Ask him to find a part time job .When your child earns his own money he will not waste it. This is in sharp contrast to what happens in our country where children are used to pleading with their parents for pocket money.
- You spend heavily on yourself such as on new clothes and new shoes. The child asks for money for that latest videogame. You tell him you have no money and ask him to save for the future. The child does not listen to what you say but sees what you do. They figure that if you can indulge in your needs then you can indulge their needs. If your kids see you wasting money they too would do the same.
- Invite your child for financial discussions. Show them how the income earned goes to pay taxes, the loans or mortgages, the electricity bills, food bills, laundry and water bills and so on.
- Teach your child to learn from your mistakes .Teach him the financial mistakes you made when you overspent on credit. Maybe you had a bad gambling habit and fell into debt. You spent extravagantly on films and theatre. You can guide them on how to avoid such financial mistakes in the future. There was this case which came to my mind where a parent told her son how in her college days she shopped for clothes, shoes, and fine dining and swiped her card without caring that this was borrowed money and compound interest is charged on this card. Before long the bills were so high that they had exceeded INR 30000 which was a big sum in those days. The parent explains to her son how excess spending and debt affects the credit score and results in higher interest rates on your essential loans. In some cases if you are in serious debt you cannot obtain your loans.
- Always set low credit limits on your children’s credit cards so that they do not fall in debt. Never pay off these debts yourself .Make the adolescent son of yours pay the debt himself so that he understands the value of money.
- Learn about the expenditure or the amounts you spend on the child’s clothes and toys. Then give your child that sum of money and see how he spends this money. The child learns the value of money himself.
- Teach your adolescent son how to keep a portion of the money he earns or gets as an allowance aside. This encourages the saving habit.
I would like to end this article with the famous saying" He Who Hesitates Is Lost". Always train your children for the future. Help them make their own financial decisions.