Inculcating financial planning in students; practical tips for parents
In an era marked by rapid technological advancements and evolving societal dynamics, the need for financial literacy has never been more critical.
It is important to inculcate financial planning skills in students and offer practical tips for parents navigating this essential aspect of their children’s education”.
The Significance of Financial Literacy
Financial literacy is more than just a set of skills; it is a fundamental life skill that equips individuals with the knowledge and tools to make informed decisions about money. As we witness the world becoming increasingly interconnected and driven by economic complexities, instilling financial literacy in students becomes imperative for their future success and well-being. In the constant striving to provide the best education for their children, financial literacy is one aspect of education that often gets overlooked by parents.
Practical Tips for Parents
Start Early: The Foundation of Financial Literacy
Financial education should commence early in a child’s life, laying the foundation for a lifetime of responsible financial decision-making. Parents play a pivotal role in this process, serving as the primary influencers in shaping their children’s attitudes and behaviours towards money. One should understand the importance of starting early, integrating financial literacy into the broader spectrum of education. While CBSE recommends Financial Literacy as one of the vocational skill options from Grade 6, the basics of financial literacy start from Grade 4.
Have an Open Dialogue about Money Matters:
Encourage open and age-appropriate discussions about money within the family. Share insights about budgeting, saving, and the value of money. Answering children’s questions and involving them in financial conversations helps demystify the topic and fosters a healthy attitude towards money. There are dedicated chapters on finding out ‘Who is the loose spender’ of the family, objectively – this is an interesting activity conducted by answering the leading questions provided.
Set a Savings Example:
Lead by example when it comes to savings. a family savings goal and visibly working towards it provides children with a tangible demonstration of financial planning. This hands-on experience instils the importance of saving for future goals.
Introduce Budgeting Basics:
As children grow older, gradually introduce them to the concept of budgeting. Teach them how to allocate money for different purposes, including savings, spending, and sharing. Practical exercises such as creating a budget for a small project or managing a limited allowance can serve as valuable learning experiences. As part of different activities, how to plan a birthday party and family vacations in a specific budget, are included. Such honest and open discussions and documentation make the young learners see budgeting as a practical and wise activity and not a restraint. This positive attitude towards budgeting will empower them in taking practical decisions in the future.
Teach Wise Spending Habits:
Help children distinguish between needs and wants. Encourage them to think critically before making a purchase, considering factors such as necessity, quality, and value for money. This habit lays the groundwork for responsible spending choices in the future. There should be a huge focus on differentiating between some common terminologies of this domain which includes needs and wants, saving and investments, money and wealth, assets and liabilities, active and passive income, deficit and surplus and more. Learners are also introduced to the importance of ‘delayed gratification ‘and saying ‘NO’ to peer pressure and the risk of living the high image.
Explore the Power of Compound Interest:
Introduce the concept of compound interest in a simple and engaging manner. Demonstrating how money can grow over time through savings and investment allows children to appreciate the long-term benefits of financial planning. The senior learners are provided an entry-level exposure to stocks, mutual funds, SIPs and real estate, thereby making it a day-to-day vocabulary along with saving banks, fixed deposits and other conventional investments.
Involve Children in Financial Decision-Making:
As children mature, involve them in family financial decisions. Discussing choices such as major purchases, investments and even charitable contributions provides valuable insights into the decision-making process and encourages a sense of responsibility. Financial decision-making is a daily affair and learners are exposed to it in our programme, extensively.
Utilise Technology for Financial Education:
Leverage educational apps and online resources, focused on financial literacy. Many interactive tools are designed to make learning about money, engaging and accessible for children. We can actively explore innovative ways to incorporate technology into financial education, aligning with the preferences and interests of today’s tech-savvy generation. While exposing the learners to technology and its benefits, we can ensure that the learners are aware of potential risks and are careful in general, while using it for transacting money.
Encourage Entrepreneurial Thinking:
Foster entrepreneurial skills by encouraging children to explore small business ideas or engage in simple entrepreneurial ventures. These experiences not only enhance their financial literacy but also instil a sense of initiative and resourcefulness. How to make ‘SMART’ goals as a budding entrepreneur and the difference between a ‘businessman’ and an ‘entrepreneur’ is taught to the learners. Reflection and realignment are two important goals which are all much-needed twenty-first century skills.
Discuss the Impact of Choices:
Help children understand the consequences of financial choices. Discussing real-life scenarios, both positive and negative, helps them develop a sense of accountability and a heightened awareness of the impact of financial decisions on their lives and goals. To teach this aspect in schools, case studies are mostly used. In an ever-changing world, being alert and transitioning as per the needs and scenarios, is critical to make progress and survive.
Promote Long-Term Financial Goals:
Emphasise the importance of setting and working towards long-term financial goals. Whether it’s saving for higher education, a home, or starting a business, instilling a sense of purpose and direction encourages disciplined financial habits from a young age. In schools, the learners are asked to analyse questions such as (1) Where am I? (2) Where do I want to go? and (3) How do I get there? In another module, learners are asked to imagine a scenario where they are required to save money for a course they plan to join in future. Stories, scenarios, and case studies are also used to provide adequate thinking and solution-oriented approach to the learners.
In the pursuit of comprehensive education, the pivotal role of financial literacy is to shape well-rounded individuals. The organisation’s commitment extends well beyond traditional academic subjects to include essential life skills, such as financial planning. By weaving financial literacy into its educational framework, we aim to contribute to the development of students who are not only academically proficient but also equipped with practical life skills.
In conclusion, inculcating financial planning skills in students is a shared responsibility that requires collaboration between educational institutions, parents, and society at large. It’s our responsibility to invest in partnering with parents to foster a generation that understands the intricacies of financial planning and is empowered to make informed decisions about their financial well-being, thereby setting them up for success in their career and lives.
The author is COO at Zee Learn Ltd. Views are personal.
