Sarang Ahuja | Finance

Leader, Financial Expert, Game Changer

Tag: financial literacy

Talking to your Kids about Finance—Sarang Ahuja

Talking to Your Kids About Finance

It can be tough to broach the subject of money with kids. After all, they likely haven’t had a real job or had to worry about their own finances early on in their lives. For children, adults appear to have their finances figured out, with magical credit cards that allow them to pay for everything and no knowledge of what goes on behind the scenes. Talks about the value of saving money are generally the baseline measure taken to help kids understand finance, but even then, the idea of spending and saving money may seem a world away to them.

I’d like to share a few of the ways that you can talk to your kids about money in a way that can prepare them for the future.

Explain how your finances work.

Children are renowned for their curiosity, and when speaking with them, it helps to treat them like people and not talk down to them. That said, it can be difficult to explain finances in terms that they would readily understand. But some of the basics—how a credit card must be paid back, how monthly expenses can define a budget—can be crucial in giving your children a sense of the effort that goes into managing money.

With the amount of automation that comes with managing finances, it can seem like an effortless process to an outsider, something that anybody can tell you is certainly not true. Dissect the accounts, payments, and taxes that go into every transaction with your children. You’ll likely find that they’ll have plenty of questions of their own.

Teach Shopping Habits.

Make your kids into smart shoppers by showing them the ways that you compare goods when shopping. Note to them the size and price, and experiment with different brands to spark a discussion about whether or not paying extra for a certain brand is worth it.

Work On Saving Goals.

Saving is one of the basic tenets of financial management, but to what end? Work with your children and encourage them to set saving goals, even if they’re relatively minor. Is there a new game that they want? Talk to them about the price and how long it will take to save up for it. If they get a regular allowance, help put in perspective how far their money goes. Start a savings account for your child, and teach them the value of setting funds aside for the future. Talk to them about setting aside things like birthday and holiday money in this account.

Set a Budget.

This one is more geared at older kids coming up on their teens, but breaking down monthly expenses and comparing them to income is a valuable lesson. As a child, it can be easy to forget about the transactions that keep an individual afloat, from rent to food to car payments. Create a somewhat simplified budget with them, giving them a better sense of how you allocate your finances each month, and give them the chance to plan one of their own.

Invest Wisely.

Once you’ve covered a lot of the basics, talk of stocks and investment can help kids understand the value inherent in businesses. Make it a family activity; have every individual track a stock and discuss the highs and lows that it goes through over the course of several weeks.

Teach Giving.

With all of the pressure to accumulate enough cash to balance a budget, it is still important to teach your children that, at the end of the day, there is still always someone less fortunate that is worth giving back to. Encourage them to research different charities, and perhaps even foster their own fundraising efforts for giving back to the cause of their choice.

After all, it’s not just about encouraging them to be better spenders, but encouraging them to be better people.

Personal Finance 101 – 5 Steps to Successful Budgeting

To put it simply, a personal financial budget allows you to itemize your entire finances holistically for any given period of time. This concept helps you determine whether you can grab that bite to eat or whether you should head home for that peanut butter and jelly sandwich. This type of planning and monitoring allows you to identify any wasteful expenditures that you can quickly adapt and alter so that you leverage and optimize your money for your future financial goals. This can only start when you actually break down your expenses. For many, they will be surprised by what they find. Those $5.00 coffees or $15.00 lunches can add up in an incredibly negative way. But recognize those flaws is the first step in optimizing your finances for the better.

In this quick simple video, you will find some helpful hints and tips of how to successfully budget for your future goals. this sense of financial clarity will not only alleviate the stress and anxiety of paying bills, but also track and highlight your financial health in comparison to your financial goals.

Preparing the Future Starts with Financial Literacy

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Personal finance literacy is more than just being able to balance a checkbook and compare prices. It also includes skills like long-term vision and strategic planning for a person’s financial future. In the United States, we make a great effort to teach our children how to read and write. But the necessary disciplines of financial literacy seem to have been overlooked day-in and day-out for our future leaders of tomorrow. While as much as we can tailor our focuses to the fundamentals of learning, we as a society need to begin putting precedence on the importance of personal financial literacy. For our children, the concepts of financial literacy and money management are skills our kids can cultivate and leverage throughout their lives. The more we veer away and over look the importance of this concept, the greater the gap our children will have preparing for a better future.

Before we continue on the importance of financial literacy, let’s start by first comprehending the entire concept holistically. Financial literacy is, by definition, the ability to use knowledge and skills to make strong, effective, and informed decisions on money and money management. This covers this from simple concepts such as knowing the difference between earning, spending, and saving to creating and maintaining a bank account. In education today, the system focuses much of its attention on the foundational skills of reading, writing, and mathematics. While I do not disagree that these three are the core skills to a successful academic and professional career, we as a society need to alter our system to better prepare our children for a stronger and fruitful future. To this end, I believe that it is vital that we incorporate financial literacy classes for our children. These classes can help transform our children into strong analytical thinkers and decision makers.

So if financial literacy can help shape our children’s lives, why haven’t parents taken the initiative to teach their kids about money management?

This has been a dark and looming question many parents are forced to ask themselves. While they themselves understand the importance of financial literacy, the topic as an overall open discussion is not that easy. In a way, many adults are intimidated, or worse embarrassed, by their own current financial status to have this open talk with their children. While talking about money may not be the most comfortable discuss with your children, acknowledging its importance can do wonders for your kids. First and foremost, as adults, you have the necessary years and experience of how to make strong, valid, and sound financial decisions. Regardless of your current financial status, your knowledge and understanding of savings and money management can be the perfect way of guiding your child for a better future. Leverage your experiences, and especially your mistakes, to teach your kids what to do with their money. That brings us to our second reason of why you should share your financial knowledge with your kids. At the end of the day, no one is perfect. We have all been in a situation where we have been overzealous with our spending. The main things you can do is to learn from those mistakes. Similar to that situation, utilize those low points at teaching points for your kids. Helping them avoid those mistakes now than later can save them a great deal of trouble when they become adults. Remember, the first person who can impact the course of your child is you. Provide them with the higher-level practices of money management. Introduce and empower them to take control of their financial lives. Once they are able to do that, you’ll know you did your job.

Now, I know what many of you are thinking. What can I teach my five-year-old child about finances? How can an eleven year old have a grasp of investing?

In this day and age, the concept of business has grown dramatically through popular stories like Mark Zuckerberg’s rise to fame to infamous American reality television investment shows like Shark Tank. Because of it’s ever-growing status, helping your child learn the basic practices of money management can start their journey of earning, saving, and managing their funds. For many parents, this begins with a simple allowance. While providing them that concept of hard work ethics is great, make sure you instill the reasons of the amount they are getting and the options they can leverage in the future. In other words, provide your child with a simple standard of budgeting. One way to do this is to show them the 50-20-30 rule where 50% will come to expenses, 20% will go to savings, and 30% will go to leisure spending. To help aid with their overall understand of this process, try introducing them through your own example with a simple example or your actual personal finances at work. The key is for them to see and practice these skills at a young age. If they make any mistakes, let them make it! The more mistakes they make, the more opportunities they can learn for in the future.

Outside of money management, be sure to teach them the concepts of overspending and expenses. While it maybe e a hard concept for them to grasp, showing them the true realities of the world can help put things into better perspective. At the end of the day, our children are our future. If there is any way that we can alleviate any bourdons or misfortunes, now is our time to do so. Benjamin Franklin said it best where, “An investment I knowledge pays the best interest.”

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