Importance of Financial Literacy in Children and Youth: Our Story
I recently read an article about how lending to unemployed students to purchase mobiles, laptops etc. is on a rise. The article spoke about how student lending companies are springing up.
The millennials are being seasoned to take on credit before they completely understand the concept of loan servicing, credit rating, savings etc. Before they have means to service their loans credit is being made available to them. Instead of being nudged to save before hey make their spending decision, availability of credit compels them to act on their attraction for that shiny Iphone.
For a couple or reasons I find this very alarming. Being a mother of a 6 year old who will be the target audience for these credit companies in another decade (Khuda na karein, though) I feel very strongly about financial literacy for kids.
Firstly financial literacy in our country among children and youth has been low. Children and even youth have always been excluded from the family financial discussions and decisions. But now kids are able to take financial decision without understanding basic financial concepts. Moreover the consent of their guardians/parents isn’t necessary. Even if consent was necessary it wouldn’t provide much comfort as only less that 30% of adult Indian’s are financially literate as per a Standard and Poor’s survey.
Secondly instead of the youth saving for their needs they are being lured to spend impulsively on luxury. As a mother I would prefer my child to weigh her spending decision, save money for the same, spend on experiences rather than things etc.
Lastly, though credit provides a boost to the economy during an economic boom, it can be devastating during recession, College pass outs may not find a job because of which they may go into default. This could ruin their credit rating which can impact their ability to take loans in the future. During a boom their may be a tendency to take on consumer loans for luxury and developing bad spending habits.
The above reasons compelled me to start a parenting experiment with allowance vs. pocket money. Which on the onset I must tell you, didn’t go too well.
One evening I told Zayb that if she helps pick her toys and clean the hall in the evening she will receive Rs. 10, which we can place in a glass jar so she can track her progress. At the end of a quarter she will have enough money to buy a new toy.
Her immediate response was ‘Dadi gives me money and buys me toys without asking me to do anything.’ There goes my plan I thought. Somehow managed to cross the bridge of this very innocent yet valid argument.
So our daily, end of day routine started a few months ago which required her to clean the hall and put her toys away. This went well for a few days. But on certain days when she was tired or cranky or both or just plain simple rebellious she would refuse to do her chores and was OK to forgo her allowance.
This was quiet alarming. In the quest of trying to teach her the value of money, help her identify her purchasing goals and help her save for her goals, I was teaching her that she gets PAID for being family. Instead of telling her she should do the chores because she is family, and her help matters, I was telling her that I will pay her for the work she does to help out around the home she lives in. Instead of teaching her the importance of keeping her home and surroundings clean I was bribing her into helping me. As a result I would always be dependent on her decision to take the bribe or decline to help out.
I haven’t yet decided by new approach on teaching her about finances, though it’s on my mind as my next parenting project.
Also what this experiment did teach me was that even with the right intention and a lot of thought and research a parent is not always bound to take the right decision. Hence we always have to be open to changing our approach.
Image Source: http://www.scarymommy.com/having-children-saves-you-money/