Many people prefer that adding personal finance in school syllabus is a good idea. According to them, a child should learn finance related concepts in school to get better with money like the adults. Both parents and school plays different roles in shaping the child. There are a lot of decisions in a child’s life like while choosing the language, sports, science, math, etc. at school, aside from implied skills of social behavior, authority, and structure, when the domain is in the hand of the household. The important thing to know about is that there are a lot of skills that the parents should teach like admiring and respecting the nature, eating good and healthy food, knowing about the human body and also how to use money properly.
In addition, the Money Advice Service (UK) in cooperation with Cambridge University has performed numerous research projects about initiating financial skills in children and young ones. In that publication named ‘what drives financial behavior?’ Published in April’18, they give a very useful framework. They distinguish the enablers and inhibitors of financial ability in three sections i.e. ability, connection, and mindset.
Ability means the knowledge of financial products along with concepts about money as well as financial numeracy. Connection means arrangement and access to money and money transactions. Mindset signifies the value and viewpoint towards money like saving, confidence as well as the financial position of the family.
Moreover, teaching about the financial concepts and things to children has no special effect on how they are going to manage their money or make any decision with money. The connection and mindset elements determined these important financial behaviors. The duty to promote the right outlook about money lies mainly with parents and not at all with the school.
What should parents do?
In recent studies, it has been found that the money habits are developed in children by the age of seven years old. Children learn from many activities and tasks that assist them how money works in the family and parents must support it through on-going involvement and motivating children in making easy decisions. For instance, a kid whom you give some money to go out and purchase some fruits for himself is going to gain the experience of looking for the prices, making his own choice, paying money, then counting the change given back to him and at last enjoying the fruit. It is a very good experience that allows a connection with day to day financial decision-making.
One important thing to understand is that the kids learn from the speaking and behavior of their parents. So, instead of teaching them about the easy assumption that money can be withdrawn from the ATM and you can buy all stuff with your credit cards, make them learn that money is a limited resource and one can get it by pursuing a job and getting it done. Make sure that the family conversations’ include taking joint money decisions and including kids in the conversation is always a better option.
The kids had older age gain financial concepts like compounding very well. It has been seen that many kids took it upon themselves to earn, save and keep aside money for a particular game, a toy or any gadget that they wanted to purchase. They also understood and perceived the deals, discounts as well as bargains.
Outlook towards a financial situation is evolved from the decisions that the household takes and the experiences kids have in contributing in such decisions. The family that shows anxiety when money goes short; the family that is resigned to believe that their financial situation will not change; Families that are careful about borrowing are all completely communicating outlook towards money in the mind of kids. Self-confidence regarding management of money develops in when parents can actively show how to make a tough decision with a finite resource.
There is a lot to know about the financial literacy. For instance, when one wants to take a personal loan, understanding how the monthly EMI (By separating Principal and interest component ) will be calculated, how stabled and floating rates will be as well as how a loan must be compared to income, are all the important factors to know. And putting these concepts in a school syllabus many years before that decision probably will not attain much.