How to teach children to handle money properly
I remember well the time when, at the age of 14, my father and I went to the bank. He wanted to open a debit account for me. The logo of that bank was not the prettiest, but their product was beautiful - a debit card that encouraged children's savings. This is what allows a child to gradually move from piggy banks to more serious methods of storing their finances, and teaches them how to use banking institutions properly. This early initiation may seem like something unnecessary, but it will actually pay off as an adult.
In fact, we depend on our parents for a very long time, even in our old age we remember all the things they told us. It's good to have financial education in the school curriculum, but it's not everywhere, or it doesn't always work the way it should. If your parents don't teach you the basics of personal finance, you have to learn it on your own. Sometimes this can lead you to make serious mistakes and spend a lot of money. If you want your child to avoid this kind of thing - then consider teaching it properly. In general, there is nothing super complicated about personal finance, but a mistake can really cost too much. There aren't many subjects in school that can have as serious an impact on your standard of living and your own comfort as knowing how to manage your finances properly.
Also, don't limit yourself to one debit card. It's important to build an early credit history. It's also a good idea to open an investment account where your child can buy and sell stocks in the future.
Steps for Financial Education
Let's try to describe the basic and most important principles on which to build a healthy financial state:
Savings discipline (from an early age)
Savings help you feel less stress and give you more freedom. You don't have to live day to day, borrow money from your loved ones and count every penny. Savings are your safety cushion. If something unpleasant happens to you, you can always work it out.
The advantage of saving as a child is the ability to enjoy compound interest. Income from the previous year is included in calculating income for the current year, and so on. Compound interest has its ally: time. So the earlier you learn to use compound interest, the better.
Your credit history is the reference with which you go to the bank and ask for a loan. Credit is a great tool that can help you make a difference in your well-being. If you don't know how to improve your credit history, you will have a much harder time using this tool. Even with new technology that helps determine credit risk - conditions can vary dramatically if approved. That is, if before, when you were approved for credit - you had exactly the same terms as an acceptable payer, even if you were excellent. Now it's different. The terms depend on your credit history.
Credit (about 15 years old or older)
This topic has its own options and tips, but if you highlight the most important ones, they would be: the ability to distinguish the cost of one loan from another (it's important to understand what the total annual cost is). You need to be able to distinguish the types of loans and choose exactly what you need (don't waste your time trying to get a business loan from an organization that specializes in consumer loans).
You should proclaim and reinforce each piece of advice with your own example. Your children are unlikely to learn how to save and manage their finances properly if you can't show them the benefits of such a strategy yourself. We must be able to pass on the right knowledge and basics to our children so that they will be satisfied with their standard of living in the future.
Was this article helpful?8 Posted by: 👨 Ram Gopal Gulati