In times when access to information and worldly goods is driving aspirations among youth, the habit of planning funds not just for current needs but also future goals is becoming increasingly important.
An early start in inculcating financial planning among teenagers and young adults can help them in the long run when they start earning and become independent.
Talking to outlook Money on Financial Literacy Month, Krishan Mishra, CEO of Financial Planning Standards Board (FPSB) India, shared how parents can use simple learning techniques to teach money management to their children.
He said that starting at an early age; these techniques will help them responsibly prioritize financial planning to meet their future financial goals:
Money Diary: Discuss the importance of a money diary with teenagers as they start managing their pocket money or monthly allowances. They can begin by listing simple things they want to use their money for over the month and allocate specific budgets. This will encourage critical thinking and lead them to evaluate bigger goals over the next couple of months and save accordingly.
Making a Spending Plan: Classify wants and needs. A discussion about what they want to spend on can help teens assess their immediate needs, which could be as simple as stationery or books, etc. Also, list down their wants, such as a new dress or a pair of sunglasses, etc. For young adults who may be pursuing their education in other cities, needs may include paying rents, tuition fees, food, etc., and wants may include an outing with friends, a movie, or shopping. When they analyze their goals, allow them to plan their spending and prioritize how they must achieve each of these within their means. It will encourage them to save and spend wisely according to the plan.
Track Your Spending: Assessing expenses is an important aspect of financial planning. Teens and young adults must be encouraged to list down all their expenses in a diary or using the numerous apps available these days that help in this regard. A glance at the expenses under each category will allow them to evaluate if the money was wisely spent or could have been utilized better to achieve better results. It helps in evaluating how they are spending their money and allows them scope for course-correction if needed.
Stay Away from Debts: This is especially important for young adults who may be living away from family to pursue their education. Spending first and thinking later can lead to big financial troubles. Advising them to use funds wisely and mutually evaluating goals can help enable a better plan.
Dining Time Discussion: Dining tables in every household are an apt place for open discussions. We must encourage discussions around money matters, investments, and financial planning. While children must be apprised of the family’s earnings, they must be involved in planning future goals for the family. Also, make young adults aware of the expenses that a household needs to address. This may include rents, EMIs, investments, insurance premiums, loans if any, etc. This helps them plan their own expenses better and avoid impulsive spending.
Youthful Business Visionaries: As a community, we offer numerous opportunities to our children to explore their entrepreneurial streak. From setting up small stalls in fairs to taking classes for younger children to earn and support their expenses, or picking voluntary work, we've seen teens and young adults trying their hands at small odd jobs to support their financial needs. These jobs offer a great opportunity for our children to not just earn but also plan and assess their spending from time to time.
Celebrating Little Achievements: All of the above are part of a continuous learning process, but what instills confidence in our children is acknowledgment of their efforts. A small treat or a little celebration when they achieve some of these goals inspires them to confidently continue on the path of financial planning.
