Importance of financial literacy amongst youngsters | Six Financial Lessons for the Youth

Children go to school with happy faces when parents hand them some money to eat snacks during recess. This is the child’s first exposure to the realm of finance. Thus, the financial journey of a human begins in childhood and not when they start earning. Inclusion of mindful financial literacy right from childhood is pivotal for children to learn the basics of financial management early on - from the time they learn to manage the ‘snacks money’, spend it wisely, and figure out that they can save some of it for their favourite candy.

Children should be taught how to save and manage money and develop a positive attitude towards financing and make their money smart. There are also implications when it comes to individuals who harbour entrepreneurial dreams.

Parents consciously don’t expose money matters in front of their children and also hide any financial problems they might be facing, all because they think this is for the betterment of children. Also, because through generations, this is how Indian households have brought up their kids. It is time to break this particular mould. While it is all right not to expose children to any grave financial matters, involving them in day-to-day money matters starting with the household expenses helps open their minds to some financial aspects. It helps them to become more responsible towards their spending habits and try to save money. Financial management slowly becomes an integral part of life because habits are like a thread woven every single day that only gets stronger with time. The sooner one starts inculcating the habit; the earlier one will master it.

This is particularly useful if India aspires to create businesses that are sound financially. Entrepreneurs exposed to the world of finance early in their lives will find a better footing.

Values cannot be taught to anyone overnight. Children imbibe them by observing those around them or when they are involved in conversations and activities and are guided towards desired results. Therefore, starting them young is imperative.

The right time is now, money is an essential commodity, and it is important to master personal money management from teenagers to achieve financial literacy. Parents constantly think about ensuring enough money for their children. They must add one more step in their constant caring and planning for their kids. They must inculcate financial intelligence in their young ones before they venture out into the world independently.

 Let's take a look at eight of the most important things to understand about money. These financial tips are designed to help you live your best financial life and take advantage of the fact that the younger you are, the more time your savings and investments have to grow.

  1. Learn Self-Control

Keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you’ll find it easy to keep your personal finances in order. Although you can effortlessly buy an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money for the purchase. Do you really want to pay interest on a pair of jeans or a box of cereal? A debit card is equally handy and takes the money from your checking account at once, keeping you from racking up an interest-bearing balance.

If you make a habit of putting all your purchases on credit cards despite not being able to pay your bill in full at the end of the month, then you might still be paying for those items in 10 years. Credit cards are convenient, and paying them off on time helps you build a good credit score. And some offer appealing rewards. Except in rare emergencies, though, make sure to always pay your balance in full when the bill arrives. Also, don’t carry more cards than you can keep track of. This financial tip is crucial for creating a healthy credit history.

  1. Control Your Financial Future

If you don’t learn to manage your money, then other people will find ways to mismanage it for you. Some of these people may be ill-intentioned, like unscrupulous, commission-based financial planners.

Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you’re armed with knowledge, don’t let anyone catch you off guard  whether it’s a significant other who slowly siphons off your bank account or friends who want you to go out and blow tons of money with them every weekend.

  1. Know Where Your Money Goes

Once you’ve gone through a few personal finance books, you’ll realize how important it is to make sure that your expenses aren’t exceeding your income. The best way to do this is by budgeting. Once you see how the cost of your morning coffee adds up over the course of a month, you’ll realize that making small, manageable changes in your everyday expenses can have as big an impact on your financial situation as getting a raise.

In addition, keeping your recurring monthly expenses as low as possible can save you significant money over time. Even if you can swing an amenity-packed apartment now, picking something simple now will let you afford to own a condominium or house sooner than you otherwise would.

  1. Start an Emergency Fund

One of personal finance’s most-repeated mantras is “pay yourself first.” No matter how much you owe in student loans or credit card debt, and no matter how low your salary may seem, it’s wise to find some amount of money in your budget to sock away in an emergency fund every month.

Having money in savings to use for emergencies can keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly expense, then pretty soon, you’ll have more than just emergency money saved up you’ll have retirement money, vacation money, or even money for a down payment on a home.

It’s easy to put your fund into a standard savings account, but this earns almost no interest. Put your fund in a high-yield savings account, short-term certificate of deposit (CD), or money market account. Otherwise, inflation will erode the value of your savings. Just make sure the rules of your savings vehicle permit you to get to your money quickly in an emergency.

  1. Start Saving for Retirement

Just as your parents probably sent you off to kindergarten with high hopes of preparing you for success in a world that seemed eons away, you need to plan for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you’ll have to invest to end up with the amount that you need to retire.

  1. Get a Grip on Taxes

It’s important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial obligations and, your hopes, meet your goals.

Take the time to learn to do your own taxes. Unless you have a complicated financial situation, it’s not that hard to do, and you won’t have the expense of paying a tax professional for the work. Tax software makes the job much easier than it was when your parents were starting out and ensures that you can file online.

Remember, you don’t need any fancy degrees or a special background to become an expert at managing your finances. If you use these six financial rules and financial tips for your life, then you can be as personally prosperous as someone with a hard-earned MBA in finance.