Imbibing Financial Literacy From A Young Age!

Since 1964, the birth anniversary of India's premier Prime Minister, Jawaharlal Nehru, is celebrated as Children's Day in India. He firmly believed that 'the children of today will make the India of tomorrow.' According to the data shared by the government, the average age of India's population is 29 years, making it one of the youngest countries in the world. These digitally native, young, working individuals with a flair for disruptive technologies, manufacturing automation, internet-based services, are expected to be instrumental towards propelling economic growth. India's demographic dividend in terms of youth population is estimated to be a distinctive advantage for the coming years.

In such an environment, financial literacy becomes one of the most significant (yet often overlooked) attributes for the youth. Surely, there is a welcome change amongst the younger working professionals who are proactively engaged in their investment journeys. However, it is not uncommon to see individuals with limited money management knowledge investing in the markets and reacting to every short term market movement or personal biases, ultimately resulting in an unsatisfactory experience.

Today, money management is one of the major sources of concern among young adults. People spend most of their adulthood worrying about their finances because they rarely take the initiative to learn about money management till the first pay check comes in! By learning how to navigate the pathway of money management from a young age onwards, individuals will be better poised to take today, to collectively look at some of the key reasons why we must not only involve children in financial decisions active decisions on their wealth management journeys. Taking the opportunity of Children's Day, to only look at some of the key reasons that advocate the importance of financial literacy from an early age.

Understand the difference between needs and wants: As adults, we are aware of the distinction between our needs (necessities) and wants (desires and aspirations). However, for children, it can be easy to misinterpret a need with a want. By teaching them about money, you can teach them how to balance their needs and wants without incurring debt. A basic understanding of financial management will go a long way in helping kinds plan their spending. For instance, a young adult on a vacation might be able to chalk out a strategic plan that will help him/her enjoy the whole experience without burning a big hole in their pocket

Learn the value of money: As a parent, at some point in time, you would have probably said "Money doesn't grow on trees!" (and most of us have even heard it from our parents!) Learning the value of money may seem like the most palpable reasons for financial literacy, but the importance of it timeless. Even though children may not be able to understand complex financial concepts at a young age, they should be taught to prioritize and manage their finances for everyday activities such as buying toys, participating in social experiences like concerts, games, visiting parks, etc. Early financial education can help children understand delayed gratification, decrease their sense of entitlement and develop responsibility

Demonstrate the significance of handling credit & debt: Rarely do we explain to our children the importance of having a good credit score or showcase the need to stay out of unwarranted debt. By the time these conversations come into being, they are probably navigating through the perils of some financial decisions that have either resulted in a bad credit score or landed them in some form of financial distress. However, the onus is on parents and educators to change this stance. Using gamification as a part to not only educate children about the difference between the two terminologies but also allowing them to chart their way out of a circumstance will surely go a long way in aiding children understand the value of money and the repercussions of making unwise financial decisions

Explain the importance of Digital Trust: While the digital world has opened up newer gateways for financial literacy, it has also made us vulnerable to multiple threats. It is therefore imperative to teach children the value of protecting their account information and password to avoid online scams. By encouraging them to factsheet, children will learn from a young age to not trust information available in the digital or social media world blindly. Additionally, warn them of the danger of opening strange and suspicious links, even if they appear to be from a friend. Out in the real world, a smart and savvy consumer mindset is another important part of financial literacy. Motivate children to do a little research before purchasing online on return policy, comparing prices and reading online reviews, to help them to make wise financial decisions

While there isn't a standard approach to imbibe financial literacy at a young age, parents and teachers are at liberty to experiment with fun and engaging ways (possibly through gamification or creating a kitty) that may generate a proactive interest. Unlike the past where information was rarely available, today, children and young adults have all the knowledge at the tip of their fingers. Technology has made investing simpler, making it vital to introduce your child to the concept of digital finance so that they can make informed financial decisions.

As we conclude this article, allow me to share an interesting adage by Warren Buffet that goes "I made my first investment at the age of 11. I was wasting my time up until then." As young India steadily steps in to spread its wings, creating an environment that is conducive to financial learning is of utmost significance.

(Raghav Iyengar, the author is the Chief Business Officer, Axis AMC)

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