"Save money now, and it will save you later."
Very well-put-together by somebody. In times of need, you don't have to look here and there for financial help. Everything will be hunky-dory. And this is what the experts call "financial independence." While adults are well-versed with the idea of financial independence, it's important for children too to learn and master the art of becoming financially independent, especially during these uncertain times. But before you go upstairs and lecture your kid with deftly chosen words, go through this guide on how to teach a child to become financially independent.
Until and unless your child knows why it's essential, he/she won't pay much heed to it, even if it can be life-altering. So, first things first, tell your child why financial independence is of paramount importance. Wondering if it's too early to discuss financial independence with your child? Well, the earlier you preach, the better it is. You are giving him/her a life-changing lesson. So, without any second thoughts, just lay your hands on the following points and go for it:
1. Dependency is Not Good
Whenever you are dependent on others, they try to control your life, and most of the time, in the wrong manner. And in the case of money matters, they might also take advantage of you. If you are financially independent, you can spend, save, or both per your own whims and fancies. You don't have to get permission from anybody or be governed by somebody else's will.
2. Saving is Important
A better understanding of financial independence comes when you start saving. Now, saving here accounts for up to an amount that will be enough for a lifetime. This means it will cover all your expenses without looking for a helping hand, whether a person or a loan.
3. Life is Unpredictable
With the world narrowly escaping the deadly claws of a novel coronavirus, life has got more unpredictable than ever. To stay stable even during unforeseeable circumstances, it's important to become financially independent.
Are you done with the preaching? Now, practice time! Hold on, is this the right time for your kid to be financially independent? Keep reading this article to fetch the answer to this question.
With changing cultures and working scenarios, it's challenging to arrive at a particular age or time at when your child should become financially independent. Do keep in mind that the environment they have grownup in tends to impact their ability to get financially independent indelibly. Some families are of the opinion that children must become financially independent by the time they reach the age of 18. On the contrary, for some, even the age at which a child starts working full-time is unsuitable for financial independence. In addition to the environment, the ideology, lifestyle, and grooming preferences of parents also act as key determinants.
For some parents, financial independence comes in the form of financial instruments. Since they have gained enough by investing in some financial instruments, they expect their kids to indulge in early bird profiteering. To dig in deep, let's understand lucrative investments and what their benefits are.
When it comes to investments, a rational person should always go for lucrative ones. Today, we can see that young investors have an unprecedented degree of financial prudence. This has fetched them with umpteen benefits, some of which have been listed below:
Financial independence can unleash the try potential of the youth of India. And this will bring a change for the better in the country, strengthening its financial prudence.
With that being said, how should one go about being financially independent? Well, we are happy to help.
Financial freedom journeys are as unique as life experiences. But there are certain footsteps your child can fit into to achieve his/her dreams. Watch out for these terrific tips that can help your child attain financial stability:
1. Kickstart With a Budget.
Treat financial independence like a game of chess. Plan before you make a move.
Financial independence doesn't come overnight. To get a good head start:
Just make sure that you are making an entry whenever you are gaining or spending. Stay on a budget that includes living expenses, savings, and investments.
2. Keep a Saving Target.
It will be great if you also keep a saving target, say, 25% of your total income. If you don't have an income source except for pocket money, then this is the time to look for a part-time job. There are tons and tons of part-time jobs that you can do to augment your current income.
3. Don't Fall Prey to Impulsive Purchasing.
Impulsive purchasing is the biggest hindrance to your financial freedom. Impulsive purchasing refers to making sudden expenses on things you don't need. These expenses can prove catastrophic for your budget. Made a few in the past? Well, be like a sponge! Absorb the lesson and grow.
4. Learn to Swim in the River of Compounding.
If they tell you that compounding is a river in which you will drown, tell them that you will swim through. Investing in a fund can fetch you an exorbitant amount by the time you retire. For example: If 20-year-old A continues to invest 100 per month in a fund at a 12% rate of interest, then by the time of 65, A would have invested 1.8 lakh, gaining about 1.5 crores. Starting late, say, at the age of 35, will culminate in a total investment of 12 lakhs and a gain of 1.3 crores. So, the earlier you start, the better it is.
5. Keep Your Investments Diversified.
Go for mutual funds or other volatile instruments. Don't stick to the low-return savings account. You can also opt for a hybrid of equity and debt. Experiment, but be cautious.
6. Debt is No-devil!
Most of Indians treat debt as a devil, capable of hexing your financial freedom. But that's not the case. Opting for a debt to invest further or for some constructive purposes such as pursuing further education can yield significant returns. However, one needs to exercise caution. Don't miss repayment deadlines.
7. Stay Under the Shed of Self-discipline.
All the tips culminate in self-discipline, a fundamental principle. If there is no self-discipline, financial independence will never be attained.
8. Open a Minor Demat Account
Parents and guardians can better manage their children's finances with the help of a minor Demat account. This account can be used to save for your children's education, weddings, relocations for jobs, etc. Children are introduced to the world of financial independence through a minor Demat account. Investing in your minor account is the most prudent financial move, investment plan, and policy for securing their future.
Experts say the last few years have witnessed unprecedented youth retail participation in India's stock market. With stocks, and crypto, amongst other investment portfolios, becoming dime-a-dozen, we can expect financial independence to become a household skill in the coming times. But for that, we need our children to develop money habits now. So, ask your kid to get set and become financially independent now!
Secure Your kid's future smartly!