Financial Literacy

What is Financial Literacy?

Why is it important for children to be financially literate?

Indian parents enjoy discussing history, culture, mythology, values, ethics, and character with their children. But when you ask them to talk about money with their kids, they say their kids aren't old enough. Let's face it - children don't really need to be financial prodigies to understand personal finance.
Financial literacy is not typically taught in mathematics or accounting classes. Schools and colleges prepare them with skills to earn money. But now more than ever, its critical to understand how to manage their money. It is essential for the youth to have the knowledge and tools to plan and achieve their financial freedom earlier in life. It is no longer necessary to work till 70 to achieve financial peace of mind.

What is Financial Literacy?

Financial literacy is the capacity to use information and skills to successfully manage your financial resources over your lifetime. Financial literacy, as defined by the Organisation for Economic Co-operation and Development (OECD), is a combination of financial awareness, knowledge, skills, attitude, and behaviour that are required to make sound financial decisions and attain individual financial well-being.
When you're financially literate, you know how to manage your money and spend your earnings appropriately, build and grow your savings, and avoid too much debt. You have the information to make informed financial decisions and, eventually, to assess investment opportunities.
These life lessons can begin at a young age without the children even realising it. Giving children a weekly allowance and allowing them to put it in a piggy bank or spend it on whatever they like helps children evaluate their options and make financial decisions from an early age.

Why is Financial Literacy Important for Children?

Most parents offer their children a piggy bank in which they can store their spare change, birthday money, and monetary gifts from relatives. This concept positively aids children in developing a saving mentality. However, it is also essential for them to understand how to grow their savings. If youngsters grasp the notion of investing at an early age, they will be less likely to invest in risky investments later and more likely to realize the benefits of compounding their investments.

Teaching financial literacy to children at a young age has a number of advantages, including:

  • Your children will recognise the worth of money and will think about their spending decisions before asking you for money.
  • Once they begin to appreciate the worth of things, they will be far more grateful when they are given a gift or reward.
  • Children will be better prepared to avoid financial debt and bankruptcy in the future if they are taught about financial pitfalls and scams.
  • They may be more likely to set SMART goals and save for them effectively, be it a vacation, college fee, a house or putting money aside for retirement.
  • They will live happier, less stressful lives — this benefit is sometimes overlooked, but it should be stressed when examining the long-term effects of financial literacy.
Are you ready to learn more about financial literacy?

That's all there is to it! You've probably come to a firmer conclusion about whether financial literacy should play a larger role in children's education by now.
Money is a necessary commodity, and it is critical for our children to start understanding money and how to manage it as early as possible. In most developed countries financial literacy is part of the school curriculum, with children starting their financial journey as young as 8.