Financial literacy for kids is about ensuring that your child is educated on the best way to manage finances. This is a way of securing their future. This is because they will be able to learn how to manage money in all ways possible. This helps them spend wisely at all times.
But the challenge for parents is in familiarising children with ideas such as inflation and insurance, without boring them to tears with our usual rants?
Parents can share real time example so that they don’t get bored. You can show them youtube videos relating to finances.
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Take inflation, for instance.
Prices of products and services going up over time is something we can make our children understand. This is the foundation for many other concepts such as supply and demand, interest rate and the need for savings.
The story of rahul a maid in Bengaluru, is used to introduce this idea The old lady he works for plans a birthday party for her grandson and buys goodies such as chocolate cake, toys and new clothes. When she casually mentions the price she paid for these, Mani is shocked; just six years ago he had bought these items at bargain prices.
He thinks someone had fleeced her, but she explains how prices go up over time and that is normal.
This fact gets rahul worried, as the cash he has been stashing in a bag under his bed may not be enough for the more expensive future.
Grandma explains the idea of getting money to grow and decides to keep his money in the bank to earn interest.
No rocket science here, but the story repeats the price increase in different products — all of them of interest to children — to ensure that the point is made.
And rather than preach economics, it moves on to the practical question of how price increases can impact you adversely and what you can do about it. Putting aside money for a rainy day is another life lesson and a habit that can be taught early.
Introducing insurance
Sufficient savings may not be feasible for many situations and some risk mitigation ideas are needed. Insurance is explained through a clever and time-tested story-in-a-story (one and a half stories) format, bringing old-world kings and jungle robbers along with car and health insurance.
A precious crown is to be made for a king, but there is the risk that a dacoit in the jungle may strike when it is transported. A clever lady suggests a deal to the goldsmith — deposit 20 coins and she will pay back the 200 coins it took to make the crown in case it is stolen. This backdrop is used to explain modern day insurance products, with a new product idea of toy insurance thrown in.
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