The Indian economy is healing and so is the investment sector. The global pandemic has hit the nation badly and has put numerous lives in danger. It has not only affected the nation mentally and physically but has also jeopardized the financial stability. To recuperate from such a crisis there is an urgent need to make the people financially literate which, at the moment seems to be scarce even in the adults of the nation. The studies reveal that out of the total population of India, not even 74% of the adults have the basic knowledge of Finance and investments. Its high time now that the country should be educated relating to managing of finances regardless of age, education and location. Financial education is imperative to be imparted at an early age.The students in their school only should be made to realise the importance of managing of finances and investments and how it can be life-changing.
Financial education acts as a tool to bridge the gap between investments and economic growth. It covers all areas from understanding the basic accounting concepts to banking, to credit cards etc. An early financial awareness can lead to a strong foundation of children right from their school which can act as a catalyst for financial growth and success.
The earlier a child is given exposure towards being financially literate, the better he will be able to manage his finances in life. Learning to manage money wisely will ultimately become an indispensable life skill and make the accomplishment of their goals easier.
Financially literate children are more likely to be entrepreneurial and have a much clearer understanding of their future goals which eventually leads to economic development.
But it is very unfortunate to know that there is no importance being given to financial education in our conventional education system. Teens step into adulthood with no or little knowledge about managing money. At this time, parents come to the rescue who themselves aren’t much aware of the basics of financial education.
An individual should know the basics of financial education like budgeting, debt, savings and investments. An explanation of these concepts is as follows:
- Correct use of Debts: Borrowing money form lending institutions is known as debt. Debts usually are not considered to be good as interest is charged on taking debts and non-payment of debts can lead to grave circumstances. But the purpose of debt is of utmost importance. Debts should be taken for productive purposes only. Borrowing money for things that are not very useful leads to unnecessary financial burden and can be risky in the longer run.
- Importance of budgeting: Budgeting is an important tool for learning the basics of financial planning. Children should be given to plan their expenses for short spans of time and try to adhere to the planned budgets to learn the basics of money management.
- Importance of Saving: Saving is a tool for keeping the expenses in control. The children should be made to save and keep the expenses within limits and set aside some amount of money from their pocket-money to keep for future use. This makes them realise the importance of money.
- Importance of Investing: Making the students aware of the importance of investments at an early age can add value. They should be made aware of the concepts wealth creation and how investments can earn returns due to the effects of compounding.
These concepts can be introduced at a young age by making small changes in the habits and involving children in planning and budgeting even in the household expenses. Mentioned below are some ways how parents themselves can guide the children towards basics of financial literacy:
- Managing their own expenses: Children can be given some fixed amount of money for fixed time and can be asked to manage their own finances and keep a check on their spending.
- Importance of wise spending: Children can be made to learn to spend wisely. If the kids mention certain things to be bought, parents can allot them a budget to make them choose the more important items to be spent on and avoid the less important ones.
- Making them aware of financial crunch: Children should be made aware if the family is facing financial crisis. Also, they can be asked to cut down on their expenses.
- Teaching the importance of saving: A joint account with the child can be opened by a parent and regularly some money can be deposited in the account to make the child the basic idea of savings.
- Making dummy investments: There are a lot of financial soft wares that allow investors to make dummy investments in stock market based on the stock market indices. Children can be guided into making such investments and yielding profits.
- Introduce digital finance: Parents should teach the children the benefits of digital finance and how one needs to take informed financial decisions.
The government of India, along with RBI has taken some initiatives to introduce financial literacy in the school curriculum. These programmes would contribute in making the students aware about the stock market investments, insurance plans etc. Making the children financially aware at an early age can make them take wise financial decisions and inculcate healthy money management habits. This will not only help them managing personal finances but also bring about economic progress.
For more information visit: https://www.jagannath.org/
