Managing Personal Finances – Insights For Children
Author: Akshith R Satheesh, Age 12
Managing personal finance is important for many reasons, the most significant of which is for financial stability. A good understanding enables us to plan according to our income, avoid overspending on unnecessary items & helps us save for any emergencies. If we have a proper financial plan we can manage our financial position better and will also enable us to grow our assets, better our living standards, offer financial security to the family, and plan for post-retirement expenses.
To understand this topic better, I am talking to Mr Nataraj Parameshwaran, the Group Vice-President of USG BORAL, a neighbour and the father of my friend.
What Is Personal Finance?
Personal finance is how one manages their money in terms of earnings, spending and budgeting. It helps put a budget together to track their income, expenses, and savings.
How Do You Encourage Kids To Manage Personal Finance Well?
Kids should first learn basic budgeting. Anytime we have to balance money incoming and outgoing, it is called budgeting. But you kids have to use basic budgeting. In basic budgeting, we pull up a budget for some items, and at the end of the month, we check whether we are within our budget. This is basic budgeting.
How Can We Ensure To Have A Good Credit Record?
Credit is not a favourable thing to have. So, the best credit is to have no credit at all. As long as we use credit or debit cards for convenience purposes, it is okay. But if you think credit cards are free money, that’s when you are in trouble. So, if we have no credit, we know that we are managing our finances well, so this is the best scenario.
Why Do People Fall Into Debt So Easily These Days?
Earnings – Expense = Savings. If we spend more than we earn, then we fall into debt. So that’s why the budget is used to know how you are spending your money and how much you are saving. So, people who consistently overspend, fall into debt. It could also be because people make bad choices. Some people also fall into debt because of factors beyond their control. It is the bad choice part that we can control. They can budget, save, and spend in emergencies.
Can We Have Some Money-Saving Tips?
This is what elders used to say:
Save for a rainy day. It means that you always have to put away money every month in a disciplined manner so that you have money for unanticipated emergencies or expenses. So, if one does not put away that money, they will not be able to overcome tough times. Another money-saving tip is to think before you spend. Think about whether it is needed or wanted.
Can We Build Wealth Just By Saving?
Yes, we can build wealth by saving. But this alone may not be enough.
Saving falls into two categories: cash saving which is for day-to-day needs. The second part is investment. Investment is a long-term saving. So together, with both types of savings, we can build wealth.
How Do Many People Remain Positive About Money Even In Tough Times?
People who think that they will always be happy and face no hard times will be in trouble when hard times come around. People who are very consistent in making sure they put their money into proper use and also save in a more disciplined manner, they tend to be more positive even in tough times.
If You Could Teach Children One Thing About Personal Finance, What Would It Be and Why?
I would tell them about want and need. Want is things that we don’t really need but feel the compulsion to have. Need is what we require for our life. So, when you are about to ask for something, you have to think about whether you really need it. This is what I would tell children.