To get literate, we often forget that becoming financially literate is equally important. Personal savings and finance are the skills that everyone should possess. The current education system needs a transformation to help students learn important life skills. As a parent, it is important that you focus and impart financial skills to your children before life teaches the same. But how can you do the same? Before that, let’s understand why students must learn financial skills at this age!
7 Reasons Why Students Should Learn Financial Skills Early
Following are 7 major reasons why students should learn financial skills early on in life:
1. Finance is the Core for Most of the Life Decisions:
This is the foremost reason why financial skills are important. Finance is the core of every important life decision. You want to get married, have kids, cut costs, go for higher studies, plan an exotic vacation, personal savings, or whatever your pursuits are, but most of your decisions involve financial consideration.
This highlights how important financial skills are in today’s time. However, sadly most people don’t possess adequate financial skills to properly analyse their decisions and end up making bad decisions. Analysing the financial aspect of every important decision that you make is a life skill that most people lack.
2. Avoiding Bad Financial Decisions:
Many people make bad or worse financial decisions. One of the worst traps that a person can be in is the ‘debt trap’. A debt trap is a situation whereby people find it difficult to repay their loans, especially because of high-interest payments.
Once you fall into a debt trap, getting free of debt might take months and years. Forget about financial freedom. There arise certain situations that require critical financial considerations. This is where the financial skills you learn can save you from messing up your financial health. A bad financial decision can cost you some of the most crucial years of your life.
3. Proactive Preparation for Emergencies:
Emergencies can knock on your door anytime. Are you financially ready to face such emergencies? Students need to be prepared for these types of questions. Being proactively prepared for emergencies (here, we mean financial emergencies) won’t avoid these emergencies from coming but it will certainly provide you relief and resources to tackle such situations.
If you are unprepared, you will have difficulty sorting things out. Preparing for emergencies typically involves having an emergency fund. As one of the financial rules goes, one must have an emergency fund equivalent to at least six months of expenditure, if not more. There’s more to it than just having an emergency budget.
Budgeting is one of the most important skills as it will impact your entire cash flow and, on a large scale, your entire life. Students should learn budgeting early on in life. Some of the most important knowledge everyone should learn is how much to allocate under which expense head, how to cut costs, the amount to save each month, financial rules they should follow while budgeting, etc.
For instance, the 50:30:20 rule states that 50% of your income should be allocated towards meeting your needs, 30% of your income should be allocated towards your wants and desires and 20% of your income should go towards savings investing. Therefore, one can prepare a budget accordingly.
5. Wealth Creation:
Leaping further from personal savings, wealth is what everyone desires! But whether everyone achieves it or not boils down to their financial knowledge, skills and management. One of the most precious gifts of learning financial skills is that students can start their investing journey early in life. Investing is a long-term game. The longer you stay invested, the wealthier you become.
Warren Buffet is a real-life example of investing. As the fact goes, he accumulated more than 99% of his wealth after 50 years. This is the power of compounding. To reap the benefits of compounding, one needs to stay invested longer.
6. Good Career Prospects:
Finance is not only a skill but an entire career option. Early teaching of financial skills can help students decide whether they find it interesting and their cup of tea. If the answer is yes, they may pursue a career in finance.
The finance field is very rewarding regarding money and social status. Financial skills are something that a student can learn from online schooling as well.
7. Retirement Planning:
Retirement is that stage of life when you are free from all your responsibilities and worries. If planned properly, in terms of health and wealth, you can enjoy your retirement life to the fullest. Retirement planning is not a one-time exercise but a series of financial decisions and actions over several years.
Most people fail to plan for their retirement during adulthood and end up dependent on other people for their needs during their sunset years. It’s extremely important to save for retirement from day 1 to have a sufficient corpus to meet all your needs and requirements.
How Can Students Learn Financial Skills?
While you might have understood the importance of financial skills, it is disappointing to know that not many schools teach them to their students. Its importance is duly undermined in the traditional schooling system; therefore, parents must explore opportunities to make it a part of their child’s curriculum.
A good way out is to go for a non-conventional online schooling system whereby students study topics of relevance and importance in today’s society. 21K School is India’s first entirely online and the world’s first web3.0 school focusing on what’s important rather than what currently is. It allows students to learn and gain knowledge about the subject of their interest. This allows parents to imbibe core knowledge and skills into their children and plan their careers accordingly.