The complete lack of exposure to practical finance skills during the school and college years is something that most of us as Indians can relate to. While our education system has always been extremely thorough and robust in terms of imparting the best theoretical knowledge, it lacks when it comes to the more practical aspects of living through life.
Most of us have grown up with very little or no practical money lessons at all. This has been a far widespread problem, which is why our country even today has a negligible fraction of financially aware young adults. Given this reality, its important as being parents to make up for that gap, for there’s no escape for anyone from the reality outside of the classroom.
To that end, here are some ways by which you can help your kids learn some practical money lessons that are definitely going to benefit them in their lives:
1. Regular Involvement in Investment Decisions
While most parents choose to keep their children completely out of the ambit of their financial decision-making, it’s actually good if you involve your kids. By doing so, you equip them to learn as they observe you save and invest and think through your monetary actions.
By sharing how you plan and work towards budgeting and saving, you’ll put them in a better place to understand how to live in a limited budget and save effectively for investing purposes. You can explain to them about the massive benefit of compounding, and why investing early is always a wise call for growing money and wealth in the long term.
Also, say, if you’re investing in financial assets like property or mutual funds or anything for that matter, you can spend some time to explain to them the basics of your decision. You could discuss why you’re going for that asset, and what makes it beneficial for the long term.
Investing your time and practically explaining these things to them can go a long way into developing a sharp mindset for their future.
Explaining How to Rightly Expenditure Between Wants and Needs
As much as you love pampering your child and can do whatever you can to make each one of their dreams come true, it’s important that you teach them how to distinguish between their needs and desires. You can explain to your children that needs are important and must be fulfilled, but wants are not and may need to wait out depending on the expenditure involved.
As you do this, you can make them understand that the habit of fulfilling wants by means of loans, both directly and indirectly is a financial vice and can spell a lot of trouble in the future. In fact, not just trouble for them, but their dependents too!
Moreover, if you’re making any big purchases such as cars or spending huge sums on vacations by deferring them till you’re saving enough with a monthly budget, you can share that experience and plan. Their observation of you implementing such decisions will be an example for them to learn by and emulate as they grow up and make their own independent decisions.
Showing the Importance of Emergency Funds
It’s also relevant for you to teach your kids the importance and value of saving up in general and for emergency situations. As much as you want to protect them from having negative thoughts about things that can go wrong, it is your duty as a parent to help them prepare to tackle for anything that comes their way.
Hence, to that end, you must explain to them the importance of building up contingency funds and investing in insurance policies. You could do that by giving them simple but relatable examples from everyday life. For instance, how you plan for their college education, or how people plan and save for marriage celebrations.
Similarly, to make them understand the importance of insurance, you can enlighten them about how a simple term plan can actually bail out the family from a tide of financial difficulties in case the main earning member passes away. Along similar lines, explain them few term insurance benefits and make them sit beside you while you are purchasing term insurance. Watching you perform term insurance plans comparison will help them understand why you decided to go with a particular plan in the first place.
As you explain, you need to make it clear that in order to actually make all of this possible in unfortunate situations, it takes the effort in the present when everything is right and the awareness to take the decisions that matter. Also, while purchasing the term plan, don’t forget to look for benefits like add-ons, multiple payout options, income benefit and so forth offered by insurers like Max Life Insurance.
Finally, Don’t Overdo the Financial Struggle Stories
While you share with them your bits of financial wisdom, you must also be conscious not to disclose too much of financial worry to them or fight with your spouse over finances in front of them.
Doing so can make them scared or shaky about money matters as they grow up and take suboptimal decisions on account of a traumatic memory or fears. Instead, you must teach them courage and the importance of good decisions in leading a financially comfortable life.