As parents we constantly strive to provide our children with the best of everything - nourishment, guidance, knowledge, education, sports, extra-curricular training, career opportunities, and more. But when it comes to discussing money-related and financial matters with them, most of us try to shelve it for a later time - perhaps when they are adults because we often assume that money is a subject too complex for kids to comprehend. 

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Bhavishya Chaurasia - Co-Founder, Education10x by BrightCHAMPS -  in a conversation with Zee Business said that in a country like ours, where less than 27 per cent of adults are financially literate, financial education is not a luxury, it’s a burning necessity. 

According to recent data from the RBI, Indians lost at least Rs 100 crore every day to bank fraud or scams over the past seven years! When we hear of these things, we never think that it will happen to “people like us”. But given the lack of even basic financial literacy, is it really so hard to imagine that our kids might be vulnerable to such financial exploitation too, as young adults? Do you still need convincing that educating our kids and the youth about the importance of money, saving, the power of compounding, protection against scam, fraud and debt is the most valuable asset we can empower them with?

So let’s move to the next big money question on every parent’s mind: The 'When'. As in, when should you start educating your kids about money? Science says that kids as young as five or six years old develop cognitive skills needed to understand money-related concepts. So, the sooner, the better. 

And finally we arrive at the million-dollar-question: The ‘What’. It goes without saying that children should be taught the basics of money - how to budget smart, spend within means, and save fast. Why it’s important to borrow prudently and plan ahead for a comfortable post-retirement life instead of blowing up everything one makes during the carefree years of life. 

But these basics aside, experts  believe that it’s just as important to focus money concepts that have real-world implications such as taxes, exchange rates, purchasing power, inflation, good and bad debt, asset allocation, diversification, and even depreciation of monetary value. 

Sounds overwhelming? It’s really not. Kids are smarter and more observant than we think, and when we teach them in simple, direct, factually correct ways using games and simulations like the ones we use in our classes, there’s little they can’t grasp. 

"Chances are your kid has already observed that their favourite chocolate or biscuit costs significantly more every year. There’s your chance to explain inflation. Why do they need to know, you’re wondering? Because a sound understanding of inflation will help them negotiate better salaries and raises when they’re working instead of getting low-balled, which will invariably have a compounding effect on their future earnings and savings. This will also be a good opportunity to explain to them why saving and investing are imperative. While you talk to them about the different ways of investing, also teach them about the importance of diversification. Remember the proverb “don't put all your eggs in one basket''? Well, you could actually use this as an experiment to show them the importance of diversification as a risk-management strategy!" Bhavishya Chaurasia told Zee Business. 

Thanks to social media, today’s kids are always anxious about missing out or being behind. Apart from the havoc it can create on their self-esteem, the environment can be a breeding ground for developing reckless spending habits due to the blurred boundaries between needs and wants, thanks to influencers who seem to have it ALL! Habits can be difficult to shake off later. So help them differentiate between the two and show them how delayed gratification can reap more valuable rewards in the future. Investing those 100 rupees today can give you a return of 500 some years down the lane! 

"This could also be a good time to tell them about appreciating and depreciating assets. Show them how the latest computer or gadget they saw on YouTube and now want is a depreciating asset as it will get obsolete with the development of new technologies, while a savings account is an appreciating asset as it provides you with interest on the amount deposited," the co-founder of Education10x said.
   
You could use your next foreign trip to explain to your children why some currencies are stronger than others and about purchasing power parity - why you need to shell out a lot more rupees to get a dollar or pound. 

And you cannot afford to ignore the elephant in the room - taxes! Show them the taxes charged on your meals or shopping. You could also deduct a tiny amount from their monthly allowance but tell them how taxes are used by Governments to raise the standard of living of its citizens and talk to them about legal ways to save tax. 

It’s also equally important to educate them about credit and formal sources of credit. I believe we are quickly becoming a part of the buy first think later culture where we tend to purchase a lot of things on EMI, perhaps even those for which one can save up and pay for full. Tell them how multiple EMIs, loans and delayed credit card payments can negatively impact one’s credit score, making it difficult for them to get loans at reasonable interest rates in the future for things that are actual life requirements - like homes, education, or, even medical emergencies. 

Saving, investing and wealth generation - will all enable us to live comfortable, independent and secure lives in the future, especially post-retirement. But fulfilling lives are led when you inculcate the habit of giving to the not-so-fortunate ones. The joy of giving is a truly unparalleled one and instilling in kids this practice is something that all of us parents must strive to do!