Effective practiceEffective practice
Effective money practices

Welcome to this article.
Money management has always been the essence of happy & satisfied life. Every Parent wants his/her youth to be financially strong & capable. Every Youth also aspires to be self-dependent for money matters. Now the question is, how do we do this, right? Let me assure you it is really simple & easy. This article embraces powerful ways to teach money management. It has a number of easy & practical tips for financial discipline. Be it a teenager, a young adult, or a youth, this article is a value add. You can get financial tips, education as well as literacy component. The intent of this article is how to teach youth, effective Money Practices.

WANT VS LUXURYTip 1 – Teach & explain to them the difference between need and luxury – Effective Money Practices

We, as a parent, generally, tend to fulfill every “wish” or “demand” of our young one(s) as soon as possible. Although, it may have different reasons. Because of this, indirectly, we do program, them to spend money without actually knowing the Value of Money. It is not about saying “No” but imbibing the discipline of logical thinking for financial discipline.

We must discuss with them all “W”s before agreeing on spending on any item or activity or product etc. Our aim should be to look at the answers to questions like Why do you need it? What is the other option if you do not get it? What problems will you have if you do not have it? These are some of the queries, we must put across before allowing Youths to make any expense.

Let me assure every such query you raise consistently, will gradually enhance the analytical thinking of youths. Slowly they themselves will start evaluating every financial transaction before performing it. Eventually, when really needed to spend some amount, they will start comparing what is the optimal way to do so. In a way, they become more aligned to understand what is really a “Need” as against “Luxury”. In the initial stages, it may be a little difficult with regard to the emotional parameters of Human Nature. However, as we agree & allow them to spend on logical outcomes, they will understand the theme.

Few Real-life Examples:-

Here are a few Real-life Examples to consider…
1. Costly eatables during a movie.
Do we really need it for a matter of only 3 hours? Are we really hungry or trying to show off? What is the cost we pay for it outside, otherwise? Can’t we add that amount to purchase a high-quality school bag or sack?
2. Upgrade to High-End electronic gadgets.
Is the existing gadget impacting any of your daily routines? What is the intrinsic value-add you would be getting post-upgrade? How joyful it would be to spend that amount on life-enhancing items like Music, Health, or Sports equipment?

Tip 2 – Teach & explain to them the difference between Credit & Debit (Credit Card vs Debit Card)

For all of us, using Credit cards or Debit cards is a daily lifestyle, nowadays. We make most of our utility payouts, petrol-diesel payments, hotel bills, etc. using these cards. Many times we do these transactions, physically or virtually, in front of our kids. Here we must keep in mind that they are watching us using cards. Because of frequent usage, our kids may assume using a card is just a simple & common act. This is what we have to fix at an early stage of their life. We should make them understand the difference between a “borrowed life” and vs “peaceful life”. It’s time to make them aware of TIP 2 – Debit vs Credit.

As we have shown the use of cards, we should educate them about the implications too. If you miss the due day of the credit card, make them realize the surcharges paid. Should you miss EMI on a credit card, make them aware of the additional interest paid. In case you lose the card, make them understand the efforts needed for the reissue of the card. Do discuss with them the real stories about credit card defaulters & penalties/punishment levied for recovery.

Our intent here is not to frighten our youths about credit terminology, at all. We are enhancing their understanding & knowledge about money matters. These factful instances are ready-made examples for them towards financial literacy. By letting them know, the consequences of money mismanagement, we are teaching them the value of money. This will add up, as a habit, to their behavior to think twice about credit-based expenses. Subsequently, it will foster a discipline to spend via Debit card only. Ultimately it will teach them, to SPEND ONLY THAT, WHAT YOU HAVE.

Additional Information about Credit Cards & Debit Cards:-

Effective money practices: Tip 3 – Make visits to Bank, physically, along with Kids/Youth.

In today’s digital world, we perform or execute, utmost every financial transaction virtually. This helps a lot as long as things happen as expected. Owing to this, our visits to bank offices, branches are very minimal. Indirectly, this has created an environment of a speechless & faceless financial system. Hence, most of today’s generation is unaware of human interactive systems in the banking /financial domain.

Visiting a bank is an opportunity for youth to see the inner workings of the banking system. It also helps them to understand how it works. They get to observe the environment & speak to professionals. This helps them to have hands-on experience with the tools used by bankers every day. This turns out into a valuable experience for them to easily deal with the situation during technology failures. Frequent visits also make them comfortable to complete ad-hock activities easily.

Few examples to try out to make Youth Visits to Bank.
1. Give them a bearer cheque to withdraw pocket money.
2. Ask them to physically deposit a cheque in the bank.
3. Open a monthly recurring account. Then let them go to the bank to deposit money monthly.
The main intent is to make youth aware of the manual banking system & cope with it.

Tip 4 – Make Youth aware about risks of online transactions & mitigations.

With the growth in online financial transactions, risks associated with it, are also increasing drastically. We conduct many of our routine transactions like the glossary, milk bill, laundry, online shopping, etc via laptops/mobiles. While watching this, our kids/ youth, generally understand the nature of these transactions as a simple mechanism. They get the feeling as paying money online is just a task of pressing buttons. But they mainly remain unaware of frauds/hacking associated with online transactions. We have to educate them on how to protect money & what precautions to be taken. It is absolutely critical to make them understand the fatal impact of a careless online transaction.

Sharing passwords, OTPs, and keeping login screens open are a few practices that we tend to lose confidentiality of it. Doing such transactions causally only because we are at home, is not appropriate. Ultimately, we have to ensure that young ones are learning protective measures against online money transactions. It is not showing disbelief but makes them learn how to maintain secrecy & avoid shocking consequences. Whenever possible, we parents must share/discuss real cases of online fraud for more awareness. This should make them realize how to protect money online.

As you educate your kids/ youth about fraud likelihoods, they perform every financial transaction with almost care. While doing Gpay in public, answering unknown calls about financial details, etc. they should become very sensitive. They should learn to keep financial passwords protected. Additionally, they should ensure not to save passwords in browsers. Also, they keep changing passwords frequently. They do not prefer to share OTP in public. They tend not to use your cards in your absence. This awareness will help them, exceptionally well, to protect their money, from time to time.

Tip 5 – Make Youth aware of the Banking Terms

Passbook, chequebook, deposit & withdrawal slip, DD, etc are part of routine banking terms. Additionally, saving accounts, recurring accounts, credit accounts, tokens, FD, and interest are common words. However, if they do not understand the meaning of these terms, it can become complex. Considering this, explaining these terms to youth is a need of an hour.

Awareness of monetary transactions is fully related to literacy about words used in financial terminology. The digital banking system is mainly about “online transfer”. There is hardly any need to fill out a form while conducting online transactions. Once we complete the online registration and access formalities, our routine interactions with banks operate in auto mode.

However, it is possibly a half knowledge chunk that our youth get via virtual banking. Better to involve them in manual or physical banking activities. They must understand & able to fill the form with details like Name of the depositor, type of account, branch & so on. This makes them more versed with banking activities. They get a view of different forms & their usages along with meanings. They learn to write cheques, understand how to & where to sign, how to deposit & withdraw. As they grow, they become more confident to perform every transaction – virtually or physically, either way.

I have seen many youths with confused mind when they enter to bank to deposit fees. It is not because they do not have money but because they do not know how to deposit. Reason for this lack of understanding at early age.

Effective money practices: Tip 6 – Make Youth understand Denomination of Money

Denomination means value of Type of currency. Different countries have different currencies & different denominations. As we have been doing money transactions virtually, it becomes worthy to know & handle different denominations physically. Denominations can be coins or banknotes. When we perform a transaction of Say $17 or Rs. 17, online, it is just a number. But while doing it physically, it becomes different as it may have different denominations involved, at different times.

When we want to teach addition or subtraction with the example of a fruit, it is easy. Reason being, Fruit is the only & common unit used for transaction. However with money denominations, the dimension changes significantly. We must see that our kids/youth do know about these different denominations. We must also try to make them understand how to identify fake denominations. It is the way they should know how denominations represent Value of Money.

Tip 7 – Make Youth Count Money physically.

As we read about understanding of denominations, next stage is to count money physically. With advent of technology, our transactions are paper less. Physical money exchange activities are less frequent. This has developed into a different challenge altogether. Some of Youth are getting little confused when they have to handle money physically. It is because they are prone to conduct monitory activities virtually. They know value of money but they do not know how to count it with ease physically. If the denominations are of different value, situation becomes funnier.

For a business, it is likely to have some physical money transactions daily. However, job-oriented families, generally, conduct most financial activities virtually. Owing to this, many young people do not get enough exposure to deal with/ count money physically. Lack of understanding often then leads to confusion. It is observed that, those who deal with virtual money, likely to get confused with physical money activities. In such cases, we cannot rule out the chances of being deceived due to a lack of confidence.

Few Examples to increase physical know how of money: –
1. Whenever possible, involve your kids/youth in counting the money.
2. Ask them to withdraw money physically from bank at least once in a month.
3. Small payments like purchase of daily vegetables, bakery products or movie tickets etc. try to do with physical money. Make it deliberately to involve them & educate them.
4. Whenever you withdraw money from ATM, ask them to count.

Tip 8 – Make Youth realize Value of Saving & Investing.

Habit of starting to save, only after starting to self-earn, is not a good idea anymore. We parent primarily focus on managing expenses for school, tuition, transport, pocket money & so on. Here, we have to set aside some money to give to our kids specifically for savings purposes. This amount need not be a big one,but has to parked as saving. We need to be consistent to hand over this amount at a regular interval. Then, we have to just address our youth to keep this amount aside as saving.

We can help them put this amount in a recurring account. Alternatively, we can put this amount in a Mutual fund as a SIP. We may put this amount in saving accounts. Whatever we do, we have to do involving our kids / youth, while doing it. This will become a practice for them to save the money. Here we have to keep in mind that our intent is to develop a habit of saving. Based on everyone’s financial situation, saving amount can very.

As we are doing saving consistently, over the period of time, we can discuss “growth”. In case, we have kept money in Saving account, we can refer to “interest earned”. In case, we have put money in SIP, we can discuss about increased value of units. Additionally, we the amount saved; we can make them learn how to use it for a contingency. In this way, we can gradually bring them to practice of saving money first & then investing factors. Here we can introduce them to power of compound interest for long-term saving & investing. This should help them to know how to increase “value of money”

Effective money practices: Tip 9 – Make Youth maintain a list of expenses for tracking purposes.

We deal with expenses as “incur” & forget. But it is not a right way of dealing with it. To manage the expenses, we have to track them properly. Here “tracking of expenses” means aligning our income & saving activities, more efficiently & effectively. It is important to understand that sudden expenses can bring financial burden, including mental stress. Better to avoid such situations & alert our younger ones to manage it appropriately.

Simple way of managing expenses it to prepare a list of known scenarios with frequency & probable due date. Tuition fees, Monthly transport, additional classes, sports fees, monthly / yearly gatherings etc. are some common examples. Parents must ask youth to prepare & maintain exhaustive list of such scenarios. In this way, everyone becomes aware of financial needs, in advance. Parent has to sit together & supervise this, time to time.

This practice helps a lot to entire family. Firstly, younger ones become fully aware of their basic expenses. They become more responsible towards economical aspect. As the list is already made, it becomes easier to manage expenses & provision for it. Regular tracking of this list helps to prioritize expenses or activities. This discipline makes them sensitive towards future saving needs. Here they learn how to Value money.

Tip 10 – Make Youth aware of Taxation.

We do teach a lot to our young ones about saving & investing. However, we forget to make them aware about taxation concept. People generally do project tax as an additional burden. Incidentally, we then create a perception that Taxes should be avoided. While doing specific purchase transactions, we prefer to perform it, “without bill”. Practicing such activity, is neither good for Nation nor for Citizens.

Young generation should know benefits of paying Taxes. Parents should educate them how important is to pay tax legitimately. We should inject the feeling of a “Proud Taxpayer” into the minds of next generation. Some of the benefits of taxes to share with them are – 1) Funding of public infrastructure. 2) Development as well as public welfare projects. 3) Expenditure on Defense 4) Public transportation & many more. At personal level, tax benefits include Loan approvals, High cover life-insurance, Visa approvals & many more. It should be taught that tax is levied per income slabs & not at flat rate. Understanding of provision of Tax refund can make youth aligned to tax payments. Payment of taxes is a way of valuing money.

Tip 11 – Make Youth realize importance of Insurance.

Provision for insurance is beyond liability or financial burden. Unless we understand the benefits of insurance, we consider it as a low priority need. Premium charges may raise eyebrows, when we opt for it post certain age limit. Here we have to transfer our experience to youths. Insurance policy taken at early age, can support wonderfully. It is also to be kept in mind that many insurance policies are eligible for tax exemptions.

Life policy as well as medical policies at younger ages, are always preferred & recommended. These provisions help them to secure their health as well as financial aspect. As younger one grows up, they become center of family support system. Owing to this, their health condition, life condition & income become more valuable. In any extreme incident, these policies, can cover up additional costs significantly.

To learn more about insurance types & how they work, you can click on this link. Insurance
Pl be advised that I am sharing this link only for information purposes.

FINANCIAL ADVICE Effective Money Practices: Tip 12 – Encourage Youth to seek professional advice.

Professional advice is a must for Money Mangement. He/she helps you to analyze your income, your goals as well as income opportunities. Also, they help you to choose right investments option & monitor it too.
We must encourage our youth to conduct financial transactions along with advisor & seek supervision. It is important in a way to protect our Money. Unknowingly, investing our hard earned money on “tips” is a crime. As younger ones start interactions with financial advisors, they get comfort feeling. They also become mature to take some “bold” decisions based on valuable inputs from advisor.

Conclusion:-
This article demonstrates how easy is it to teach youth money practices. The early we start educating them, more benefits we get as a parent & as a family. Through many of our daily transactions, we can make our kids disciplined for money matters. We should understand that imparting financial literacy is a part of effective parenting. A financially disciplined youth is a valuable asset for the country too.
I hope you have enjoyed this article.
Do comment your thoughts as well as inputs if any, in comments section.
I’ve created some more informative articles that you can come back to again and again when you have questions or want to learn more! Links below.

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By jabulani.jabulanee@gmail.com

I am an amateur cyclists having done many successful cycling expeditions as Solo / with Spouse / With Kids / With family & with friends. I am a post graduate in commerce, with distinction, from University of Pune. I have a professional experience of more than 17 years. I have worked with multi national companies like IBM & Kyndryl. I have experience with regards to client relationship, contract management, audits & testing, national - international transitions, process framing, tools deployment as well as financial management. I belong to joint family & staying along with my parents, spouse & 2 kids. Travelling, Health, technology, Finance, Parenting, reading & writing, Sports, Meditation, Cultural adherence etc are my other hobbies. I strongly believe in Powers of Universe & Power of Gratitude.

4 thought on “12 Powerful Ways to Teach Youth Effective Money Practices.”
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