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Catching Them Young, Financially!

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As an adult I always thought that financial education should be part of school curriculum to make dealing with money in real life easier. Schools teach you addition and subtraction, they teach you simple and compound interest. But what they don’t teach you is how this is immediately applicable to your bank accounts, and to income and spending once you start working – which is what schools are preparing you for.

financial-literacy

‘Financial literacy’ – The SEBI way

This lacuna in our education system has been identified by Securities and Exchange Board of India (SEBI) and they have decided to educate high-school children about investing in the stock market.

Wait a minute. In the first paragraph I was talking about ‘Financial literacy’ and suddenly we landed in ‘investing in the stock market’! Is something wrong in this picture?

The answer is a resounding YES! In the guise of ‘Financial literacy’, SEBI wants to make school-goers into investors or is it really traders they want to produce so that they generate revenues for SEBI? Do they want to enlighten the high-schooler that he can throw some money at the stock market, do some compound interest calculation and before he turns 30 or 40, he could be a crorepati?

‘Financial literacy’ – My way

One of the very fundamental things that we deal with from childhood till death (does us apart) is money. As kids we receive money from relatives as gifts, or we are asked to do some shopping for our mother’s kitchen. We often hear adults talk about it all the time. As we become teens, our need for cash increases and so do the demands we make to our parents. When we start working cash becomes king and continues to be so through out adulthood and in to old-age. So, why not we learn how to earn and manage this ‘money’ thing in a prudent way?

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As a result I imagined that we should teach our high-schoolers the basics of money including:

  1. How to account for money – income vs. spending, keeping and balancing accounts.
  2. Banking – What is the meaning of savings? What are Fixed Deposits? The instructor can then introduce them to how Simple and Compound Interest increases the money in their accounts.
  3. Insurance – The need for insurance and the basic types (like life, health, auto).
  4. Investing – Stocks, Mutual Funds, Real Estate etc.
  5. Taxes – Though not directly relevant to above, is definitely a factor that decreases wealth. So some basics might be in order.
  6. Entrepreneurship – Though not directly a topic for ‘financial literacy’, entrepreneurism when done successfully leads to wealth creation. So students can learn that taking up a day job or running a grocery store are not the only ways to earn.

As a side, I would suggest that all high-schoolers and even adults read Robert Kiyosaki’s ‘Rich Dad Poor Dad’ book. There are other useful books in the series and many other useful books from various authors but nothing is simple and easy to understand like this one.

Bottom Line

SEBI has identified a missing link in the education system. However SEBI is taking a very narrow and a self-serving approach to this which I think is not what parents nor educators would like to see. Instead this could be something that the education department headed by Kapil Sibal can look into as a prospective course that could be introduced country-wide. One idea is that this could be part of a Public Private Partnership (PPP) in education where there can be knowledge sharing and sponsorship from the banking, securities, mutual fund and insurance industries. This holistic approach to financial literacy might gain wider acceptance from all stakeholders like students, parents, educators, education ministry and the sponsors.

The students coming out of this education scheme would understand the importance of every Rupee, how to earn it, grow it, account for it and manage it better irrespective of their parent’s financial education or socio-economic status. We would lay the foundation for a society where individuals can take responsible financial decisions as they move through college and life.

What are your thoughts?

  1. Avik Kedia says

    Hi Madhav, Great Article. I am glad to share with you that SANCHAYAN Society is a NGO which has taken up the challenge of making Young Adults Financially Literate. Sanchayan is working in New Delhi among the school students, college students and underprivileged youth and conducting workshops on the topics that you mentioned above. We have not been able to get any funding in 1 year now and it is very difficult just to survive and sustain the organization from our own pockets. However the good news is that Sanchayan is committed to the cause of Financial Literacy in India and will continue its good work. Just wish we had some support from the Government!! Anyways you can find out more about us from http://www.SanchayanSociety.org

    Regards,
    Avik Kedia
    Founder
    Sanchayan Society
    9560228484

    1. Madhav Shivpuri says

      Dear Avik,

      Thanks for sharing this info. I wish you good luck.

      Are you speading word through Facebook? Do keep in touch with me (madhavshivpuri [at] gmail [dot] com) and I will see how I can help.

      Regards.
      Madhav.

  2. Mani Prakash says

    ya. support financial edcation.
    and i think it should not be limited only to school but it should introduce to adult education, night or evening school also. as 70% population is living in rural areas and literacy can be increased only by focusing to these people and this is one of the way to break barrier in India’s growth.

  3. Vishal Sanjay says

    Well said Madhav, I understood the value and power of money only when I started to read the Rich Dad Series. Even though kids don’t get any support from parents nor teachers on this subject there are many kids who are financially advanced and have also entered the stock market.

    I think this is a wonderful step Sebi and Kapil Sibal have taken, its really useful to kids.

  4. Viral says

    Very True and well said Madhav. Financial lessons are a must for growing kids and they ought to understand the value of the hard-earned money of their parents. The lessons should start right from the early age in the form of ‘Piggy Bank’ which is a traditional form of accumulating money as easily understandable by the children.

    Coming to bigger children, they need to be explained as to how credit cards are boon in current times, but can as well prove to be money-suckers if not appropriately utilised as per the terms. The family should be in a proper habit of inculcating a ‘Budget’ for themselves in order to ensure that the skills of budgeting is passed-on to children.

    1. Madhav Shivpuri says

      Viral,

      Great point. I think credit cards should be discussed in the same breath as loans without which it could be interpreted as free money!

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