Personal Finance for Kids?

I had posted a blog a few months back about a session on Personal Finance which I conducted at my organisation. It was very well received and culminated into forming a Special Interest Group. The SIG is buzzing and a lot of interesting discussions and exchange of ideas take place there.

One recent question someone asked my was about teaching personal finance basics to kids.

The query was: “How do think one can  teach a 8 year old about daily money transactions, impact, savings?”

My response was as follows:

I feel that we don’t have to teach 8-year-old kids about money so early in life. It would be better to teach them about virtues of not wasting (be it money, food or time) and vices of excesses (consumption/splurging). They can and will eventually learn concepts of money. So, the focus in their formative years should be on habit formation.

One thing I attempt and also tell people who seek my advice (which happens rarely :blush:) is to teach the kids the concept of “earning something”. We often incentivize them with “rewards” (gifts etc) and “penalties” (punishment). That’s good. But the kids should also understand that they must “earn” the reward. They must work for it , deserve it and thus get it. When you sweat for something, you value it appropriately. There is no free lunch!

I don’t understand why people try to make kids “money minded” or strive to teach everything early and spoil their innocence and childhood. It is good to learn things formally early on. However, it’s not necessary to teach them everything.

At the beginning of my session, I had quoted Einstein who said “Everything should be made as simple as possible, but not any simpler”. And then I elaborated on the quote: “It means that things should be simplified but not oversimplified or trivialized. I get annoyed when I read questions on Social Media which ask “how would you explain XYZ to a five-year old”? My answer is: “I won’t!”. Not everything can be or needs to be explained to a five year old. I can say that with confidence because my kid is five years old. So the pain is real!”

There was a healthy laughter among the audience and the message was well received!

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