Written by Dr. Sanjay Tolani, MD and CEO, Goodwill World
Building good habits takes time, and while “good” and “useful” habits are inculcated in children by parents and teachers, one vital and life-changing habit is overlooked by them – healthy money management. Managing money isn’t something one can learn overnight and start practising it the day after watching a video about it – it takes time to develop healthy money habits.
Parents and teachers often think that there’s no need to teach about managing money at an age when they’re not handling it, but that’s not how it works. Children learn what they see and what they are taught. Since they are not spoken to or taught about money and its value, they often lose or mismanage a lot of money when they first start earning – all because they were not taught about money management when it was needed the most, i.e. in their school years.
Most children are super excited to learn about money, and they are actually quite curious. Educators and parents need to play a key role in making children financially literate in their most impressionable years so that they know what to do with their money and put it to good use when they are making their own.
Once a child is old enough to know that they shouldn’t be sticking coins in their mouths, they need to be introduced to currency – coins and cash. They need to be explained what money is and how it is used by physically showing them how money works. Teachers for younger grades can do activities to create shopping scenarios to give children a basic idea.
For older grades, personal finance needs to be a subject that is taught irrespective of whether a child picks commerce or an accountancy-related elective. Finance is a vital part of everyday life, and young adults currently lack the experience and education to make even these decisions optimally. This can be detrimental to their financial health when they are suddenly thrust into a situation where they’ve to make critical life decisions that cost money.
Lack of financial knowledge can have excruciatingly painful consequences, which is why finances are a major cause of stress in adults. Debt or a lack of savings, or both can inflict hardships on a person’s life, mentally, physically, and financially. If you’re wondering what a student has to do with debt, bring your attention to a rapidly growing number of students that graduate with a crippling student loan to take care of as soon as they’re done studying.
Plenty of adults are currently feeling the pressure of financial issues and, in hindsight, believe that they could have avoided a large number of these money problems with some basic knowledge that they didn’t have or bother to acquire growing up.
Having assisted many families in the educational planning process for their children, I understand how important financial education for children is so that when they grow up, they know how to use the same for their children thereby ensuring the process continues for generations to come leaving our world financially literate.
Financial literacy leads to a healthier life, and many young adults feel that their level of personal finance knowledge leads them to financial progress. Having a financial education has undeniable life benefits. It promotes good savings habits because budgeting teaches awareness and responsibility, and they are able to learn to make better spending decisions.
Smart financial choices act as a catalyst in improving one’s credit score, which basically impacts several significant milestones in their entire life, like getting a job or applying for a credit card or renting an apartment, or getting insurance. Understanding money management results in better financial health and builds a great approach around money.
Eventually, a growing individual’s level of understanding around the basics of budgeting, spending, saving, borrowing, and investing is going to impact every part of their life and can actually be the difference between prosperity and poverty. So, the earlier their education in personal finance begins, the better their lives will be in the future.