‘Financial Literacy’ is a vast pool of understanding, knowledge and skill set. Unlike how one may briefly think, it goes far beyond knowing the meanings of a handful of heavy finance words. Instead, being financially literate is to not only be familiar with financial topics and concepts but also possess the ability to put the understanding to use and go about with everyday financial activities with ease. It suggests developing financial wisdom and enhanced decision making over time. Additionally, it also demands being aware and constantly walk along with the change of times.
This huge task – of making your child financially literate, as parents and guardians lands solemnly on you. Sounds overwhelming? Well, it doesn’t have to be. The essential part here is to merely lay them a robust foundation to start off their financial journey. Now straight up diving into this vast concept could leave behind essentials and even be hard to begin and go on about. But you can be relieved for you’re at the right place!
Imparting financial literacy to the child is a crucial activity and requires a thought through engaging curriculum in place. And this is exactly what this read has in store for you. Scroll through for a checklist of 20 financial topics you must cover with your child to ensure their financial happily ever after.
The very basis of life is to earn. Since you have been providing for them all their childhood, it can paint an impression that money is readily available. Hence, for starters, you must make them understand how money needs to be earned and requires effort.
Jobs and Getting Paid
Getting paid for a piece of work is always a lovely feeling. Job is usually the primary mode of earning but it’s more than just getting salary or wages. There’s contracts, bonuses, commissions, taxes, EPF, pension etc. Not having financial awareness, as a newbie in the profession, can lead to exploitation at the work-front. So talk to them about it —you can begin by taking the real time example of the breadwinner of the family only.
Simply earning money doesn’t get one through, it’s how one spends it that makes the difference. It’s crucial to be a good judge of spending and know how to and how much to spend, and on what all things. Help them develop healthy spending habits from a young age only so they sail smooth in the future.
Value and Worth
Something costing even ₹10 can not be of worth. One may be spending ₹1000, but spending that much on a 5 star dish may be of worth but spending the same at a street food stall? not so much. And that is what there is to decode. It is a personal judgement and a skill to determine if the cost being charged for a certain something is worth it or not. This quotient of worth can vary from person to person depending upon various factors such as income. You can best begin teaching this on your next shopping trip!
A must thing. Earning or having money doesn’t mean it is all for spending. It is extremely essential to be familiar with and actively save from as early as possible. Temporary temptations can have the kids not like the act of saving but you must make them understand how savings can be a saviour in the worst of the times. Encourage the act of saving and introduce them to savings accounts and more.
The master plan for a smart financial game is budget. Pre-planning the income, the expenses, savings, categorising how much to spend on what all stuff, all of it helps with mindful handling of money. Budgeting acts as a great instrument to wisely plan and keep track of the money. This is a must learn tool for everyone and you must have your kids get into the habit of it.
Payment methods today are far many and advanced than they were before, each with its own unique benefit and set of cons. In addition to the good old cash, we have internet banking, digital payments with wallet, UPI, banking cards and more. Explain to your child the various payment methods today, along with advising them the best place of use for each
Probably the trickiest one of the lot is taxes. Break down the system of taxation in bits and let them know the basic terminology and how the entire thing functions. Also aware them about how it’s not just a matter of choice but of legality too. Discuss the most important tax type – the Income tax, and ways to calculate it.
Banking, just like everything, too has transformed and has had met various innovations. Initially begin with explaining the basic function of the banks, how they make money, various accounts, cards and more.
But what’s to note here is that, unlike before it’s no more about physical banks or even turning 18. Yes! The Fintech sector has been flourishing and neobanks are the newest things in.
Akudo, a neobank, is a new age banking solution for teens as it offers savings account facility and a personalised prepaid VISA card. Akudo acts as a catalyst for teens to gain financial independence through financial literacy and building healthy money habits.
Loans and Repayments
Lending money in various forms such as loans and more, often comes in handy when it comes to bigger purchases such as cars, property etc. There are various kinds, one of them being student loans which is a well available and preferred option for child education. Introduce your child to the mechanism of loan and repayment, and related terms and conditions.
Loans are helpful but borrowing money isn’t just that. This brings the term Interest – an additional fee charged for the money borrowed. It is important to consider it beforehand and keep in mind the repayment of it all. Hence, introduce your child to the various types of interests and interest rates.
Property finance is essential for the future and having a fair idea from the beginning can serve good, so familiarise the child with the basic know-hows of mortgage.
Investing is a great source of secondary income and an impressive way to build potential wealth. It ensures financial security and can act as a great safety net for when times calls. Begin the conversation by introducing investing to your child then touch up on the plethora of exciting investment options, stocks, mutual funds, bonds, real estate, shares to name a few.
Phishing and Vishing
In today’s day and age, with the advancement of technology, major cyber security issues such as money related scams and frauds have exponentially grown and Phishing and Vishing are two very common of these.
Phishing is nothing but those deceptive emails that con people by asking them to click a malicious link to essentially have them share their sensitive personal, often financial information. Vishing is a similar fraud too, except the mode of communication here is verbal and utilizes the phone.
Educate your child about the various frauds and walk them through the important differentiation points to tell fishy links or mails from non-credible sources apart from the rest.
Sharing ≠ Caring
Sharing is caring is a phrase, a value taught to us from the very beginning, but its best implementation may not be in matters of money – especially in today’s digital world. It is never right to share OTPs, or other bank account details and passwords with anyone. You must aware the child of the various fraud possibilities and train them to be as cautious as they can be whilst making payments or filing details.
Financial literacy is not gained overnight and the list of topics is long and ever expanding but these are the absolute few that must not be missed. No matter the circumstances, having a hold over finance basics will always be of use and aid your child to live a financially independent life with confidence.