How would you feel if your kids are able to take efficient decisions on all money matters. Would you be happy for them? Do you want to make your kid smart by teaching 5 money lessons? I bet you, your kid is going to change his thinking after learning these 5 money lessons.
After reading “Rich Dad Poor Dad” of Robert Kiyosaki, you will know the importance of money in a Kid’s life. Personal finance education is like a graveyard for many of us including kids. Money lessons imparted while you were a kid would have certainly made a difference in your lifestyle.
A while ago, I was interacting with a kid who is around 10 years old. I had a glance of his academic activities. Apparently, nothing related to financial literacy was included in academics.
Of course, there are some things which kids may learn academically like “inflation” in economics subject. But those are restricted to theoretical knowledge.
I believe that Money lessons to teach kids should be more of practical approach and in an interactive way.
5 MONEY lessons to teach your kids:
I gave my mind some work as per Robert Kiyosaki’s”Rich Dad Poor Dad“. I realised soon that, I would have been in a better position if I had known all these money concepts when I was a kid.
You can find all my investments here: Preview of my investments.
Zerodha has done a commendable job in designing a book for kids to educate them. These books are for kids of age 7+.
I recommend everyone to have a look at these books. These books are specifically designed for kids with lot of graphics and pictures to make it more interesting.
You can order books here: Finance made easy for Kids .
All the images I have used below are from the cover page of Finance made easy for Kids .
Let us go through list of 5 money lessons to kids:
let the children know the importance of saving money. Illustrate them its importance and teach them to manage money.
Narrate them a story from your life on How saving money has helped you? Real life examples are more appealing and kids always follow parents.
It’s always better to start with small. Get them a piggy bank and ask them to deposit in small number into piggy bank out of pocket money.
Reward them if you feel they are on right path towards the goal of saving. The rewards can be anything like – Contributing more from your pocket to piggy bank or by increasing the pocket money for kids.
Saving of money not only involves saving of hard cash physically. Saving also includes cutting down your expenditure.
Make them understand the importance of frugal life. We can certainly lead a luxurious frugal life. Instead of spending money on a bus ticket, ask them to have a walk to school if it is nearby. Cultivate the habits of cutting down unnecessary expenditures which in turn helps in saving more.
You have to admit that children are quick learners. They need to understand how insurance works.
Children play with toys. Taking it as an example, get them to understand the importance of insurance. What if anything happens to the toy?
Who will pay for repairing the toy?
Also give them the solutions on How can they insure the toy and rely on the insurance provider in case of any damages or repair work need to be done.
Extend the example of toys to real life situations like life insurance, vehicle insurance, health insurance, home insurance.
Maybe While having a pizza with them, explain the consequences of being uninsured for long time and its consequences.
Do you think it is easy for kids to understand tax? Well I am not asking you to go into complexities of different type of tax that we pay.
Children think that all public utilities provided by government are free of cost. They are under the assumption that it does not belong to us.
Kids needs to realize the responsibility of owning something. And this something here is all public infrastructure.
Make them understand that We are infact paying to get all these public facilities like – Parks, Public toilets, Public transport. We are stakeholders in all public entities.
The Money that we pay to government is TAX. It is with this tax that government operates and is able to provide all social services.
Zerodha’s book “Finance made easy for Kids ” include a section on TAX. Once kids starts earning, they have to be tax compliant. Then Why not teach them when they are still young?
#4) Inflation and Banking:
The book by Zerodha “Finance made easy for Kids ” again rocks in explaining the fundamentals of inflation and banking. The understanding of these concepts could lay a foundation to the idea of saving money in a financial instrument.
Inflation is a rise in prices relative to money available.
Few days back, I wanted to shop for a bicycle.
I went to a store with a pre-determined rate and budget in my mind. This pre-determined rate was the one when I had purchased a bicycle 15 years back.
When I was in the store, I came to my senses after hearing the actual price of bicycles today. Today it is more than 10x of whatever pre-determined price I had in my mind.
One of the factors for this increase in the price of a bicycle is inflation.
Inflation is a big topic to understand. You just need to understand that value of currency decreases every year with economic growth of a country.
So, It is important to keep our money growing. As years pass by, the value of currency decreases. So 100 INR today will be of worth 90 tomorrow.
So it is always better to keep money in a saving’s account and earn interest on it. In this way, the interest you earn will beat the inflation.
#5) Stock Market:
Many think that Stock market trading and investing is gambling.
Yes, it is GAMBLING if done without knowledge.
Remember we are living in a competitive world. We need to create wealth to lead a comfortable life. This is where stock market will help us.
I feel adults are not educated enough to invest in Stock market. Do you know that only 2% of Indians are into stock market trading and investing.
Educate your child about stock market basics. Realize them potential in stock market.
I am not asking you to teach them fundamental and technical analysis of stocks. But provide them a platform to learn more about it.
This is required for all future generation kids. They should not be ignorant like others.
I had written about Minance a while ago: How my monthly rent is paid by Minance?
CEO of Minance who is active in Quora: Anurag Bhatia
This guy has started his trading when he was a kid. Now, he is running a business helping all the retail investors like you and me through minance.
Minance has helped me in generating passive income.
Knowledge sharing doesn’t end in schools and colleges. It has to start in home.
As parents, you can provide a better future to your kids in making them understand about money.
I would recommend everyone to read the following books:
Rich Dad Poor Dad by Robert Kiyosaki.