The other day I visited an entrepreneurial event. Young entrepreneurs in Dubai were showcasing innovative products. The next generation is far ahead of mine when it comes to innovation.
There is a still unanswered question in my soul. Is this new generation equipped with financial literacy? This cool and happening generation seems to know all the answers. But, how about financial literacy?
A few weeks ago, I attended another event on women entrepreneurship and to my surprise, the questions weren't about crypto currency and dollar rates. In fact, the questions revolved around the money lessons that we had learned as children, mistakes we committed in our younger years and what money lessons we can teach our kids while growing up. These questions made me pause and think - why aren't we putting more emphasis on financial learning in high school and college?
To my delight, I learned that some are already stepping up to the challenge. Recently, I was asked by an outstanding school to do some lectures on financial planning and budgeting.
According to a study conducted in 2016, nearly two-thirds of Americans surveyed did not have basic financial literacy. The numbers were even more staggering among teenagers. Around 87 per cent of teens surveyed knew little about personal finance. At the same time, the study revealed that 35 per cent of teens wanted to learn how to save money and 28 per cent about budgeting. These numbers are not comforting at all. While we are learning so much from millennials, why aren't more millennials being taught about money, budgeting, taxes and balancing a checkbook early on? Money lessons that parents can teach children over a summer break.
What can we do to make sure we're raising the next generation of entrepreneurs instead of "generation debt?"
Say no to plastic
A University of Cambridge study found that children begin to form their money habits at the age of seven. As adults, we are the example our kids follow, so we need to set the tone on how we spend money. Whipping out credit cards every time we want to buy something sends a bad message because children will believe this "magical" card is the answer to all their problems. Barely a decade ago, we went through a major financial crisis and one of the causes of that was because we borrowed more than what we could repay. Racking up debt, especially on frivolous purchases, will send kids down the same path. I learned early on that if I wanted something, I'd have to work for it. Nowadays, kids see their parents scan a card or press a button and then wheel out a cart full of groceries or a wallet stuffed with cash. However, those kids fail to value where that money came from.
Money should be earned, not given
There are two schools of thought here. One believes in giving children an allowance for doing odd jobs around the house like helping with chores, washing the car or even cleaning their rooms. Many believe that having kids work for their money is the best way to teach them about earning some money and learning the value of hard work. They're not wrong.
The other school believes in not giving kids an allowance for things they should be doing around the house anyway. Giving a commission, instead of an allowance, for chores is also a good way to introduce money. I can't say that any of these methods is totally right or wrong, but I know this: As a parent, you always want your kids to have more than you did growing up. It's part of the process. However, I also believe kids should go through the same struggles you went through as a kid. Denying them the struggle makes things too easy for them.
Help them with a bank account
Teaching kids to save a little bit of money, no matter how small an amount, will come in handy not just to buy that fancy pair of iPods, but also later on in life. Another survey done in 2016 found that one in three Americans surveyed hadn't saved enough money for retirement. In the UAE, this number, I am afraid, would be even higher. This is purely because there was no saving habit in the family to start with.
Have a healthy discussion
Talk about what you intend to spend and what you want to save for the future from your income. About two-thirds of parents remain reluctant to talk to their kids about money as they don't want to bother them with finances. That is a big mistake. The same survey also revealed that parents who talk to their kids about money at least once a week are more likely to have kids who are smarter about the subject and make better decisions later on.
As a teen, I was taught to balance a checkbook, keep a balanced account and make notes on my expense and saving pattern. Today, there are websites like FinArt that are helpful. In that context, not teaching the up-and-coming generation of entrepreneurs the basics of personal finance is very short-sighted. Schools think parents should be teaching this subject, and parents think schools should be teaching it. Both parents and schools can take up joint responsibility.
By Chanda Lokendra Kundnaney
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Al Bawaba Business.
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