Wealth Guide: Financial literacy - Setting up your kids financially independent - Expert decodes

A life without financial stress is a wish all parents have for their children. If you want your kids to be free of financial tribulations, then it’s more about how you can financially prepare them now with the right skills and the right habits to overcome money stresses as an adult. For money-smart future, they need to learn the value of saving and how money operates in their daily lives. Financial literacy is significant for every individual and it has to be inculcated from a young age. This can be started with minor steps like talking to them about finances, making smart spending choices, and balancing a budget. Divesh Bathija, co-founder of UnMath School, shares his knowledge on financial literacy and decodes the process of setting up your kids financially independent.

Budgeting 
 
"Many adults struggle to stick to a budget, but it’s much easier if budgeting starts during childhood. Set a good example, if you make smart financial decisions and stick to a budget, your child will see that and be more likely to emulate it when they reach adulthood. Explain to them the consequences of splurging and not keeping for a rainy day.  Concepts like budgeting, planning, and goal setting can all be introduced using their weekly allowance," Divesh Bathija suggested.

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Investing 
 
"Digital banking has become so easy these days. One can easily open a minor savings account and keep a track of the savings and expenses.  Parents should sit with their kids and discuss different bank options available and compare them. Let your kid also understand which bank is offering maximum profit and then open a bank account. Dedicated children’s savings accounts often boast relatively generous interest rates. These accounts hold money in a child’s name and can be a good way to encourage children to save. Teaching your kids, a good financial management system ensures they have a good future," Bathija added.

Value of hard work
 
"When kids start going to college or have a summer break, there is a lot of time that can be utilized for effective work. They should join a part-time work or internship of their choice. A part-time job is an essential part of growing up, wor taking up any other small jobs while studying should be normalized and should be encouraged to earn extra income. Indian parents generally have the mindset of children completing their higher education and then opting for work. This idea should be a breakthrough and left to children to decide if they want to work along with higher studies and fund their education as it helps them turn into more responsible and self-reliant individual. Also, it will get them familiarised with work culture, develop a skill and earn some extra money," he further added.

Involvement encourages responsibilities 
 
"Whether it's deciding where to go on vacation or buying a new fridge, it could be a worthwhile exercise to include your child in the financial decision-making process and have them help with the research. Keep the discussions open and make them aware of how much it is to run household expenses like paying for rent, groceries, and other basic utilities. To make them understand various factors that go into making a spending decision assign them some tasks like paying the electricity bill, rent, etc. which will also help them learn to take up responsibilities," he explained.

Limit financial assistance
 
"Every time your children come up with a financial problem, it is very tempting that you would want to help eliminate it. But if you do it every time, they may heavily rely on you. Instead, set boundaries and limit on your financial assistance so that they learn to fix it on their own eventually. It teaches kids about responsibility, honoring commitments, and the value of money. Gradually, educate them about the share market, teach them about investment, and how to aim for the larger goal. How we act has a more profound impact on children, so set a good example. With a great financial education around saving, working, and investing, your kids will be in the best possible position to succeed financially when they grow up," he concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)