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Correct option is C - Teaching your child the concepts of needs and wants is crucial for building sound financial reasoning. Needs are essentials, while wants are non-essentials. Through real-life situations like the choice between needing shoes and wanting a toy, you can help them prioritize needs over wants and avoid unnecessary spending.
Correct option is A - Budgeting simply refers to creating a plan to spend your money. It helps prioritize to make the most of the available resources. Introduce them to budgeting through a simple and hands-on method like the concept of savings jars labelled – spend, save, and share. This helps understand the concepts of goal setting and sharing with others while facilitating impulse control.
Correct option is B - Using a visible goal tracker such as a jar or a chart helps children see the progress they make. It can also help them understand the concepts of planning and delayed gratification instead of teaching them to save through strict control or punishment.
Correct option is A - Ideally, the right time to talk about investing with a child is once they are at least 10-11 years old. By this time, they clearly understand the relation between effort and reward. Start with basic concepts such as the principles of return, risk, and compounding. Encourage them to use a mock investment portfolio to understand how funds can be allocated to different investments, market fluctuations, and long-term thinking.
Correct option is B - In today’s world of growing reliance on UPIs and e-wallets, it’s important to help children understand the origin of money used. It refers to the simple concepts of debit and credit. While the former refers to money in your bank account, the latter refers to borrowed funds. Helping children understand this difference goes a long way in laying solid foundation for their future spending behaviour.
Correct option is D - Encouraging a chore-based earning system is an effective means to instil a sense of money-awareness in children and cultivate responsibility. When they know the effort that goes into earning, it helps create cautious spending habits later in life.
Correct option is D - A simple yet excellent means to introduce children to basic banking is by opening a joint account in their name or a minor savings account. It not only helps introduce the concept of formalising their savings but the idea of interest too. This simple step helps nurture an early relationship with financial systems.
Correct option is B - Teaching kids that banks not only keep money safe and liquid but also help it grow through interest is a great first step to financial literacy.
Correct option is A - If you teach a child that compound interest is like earning interest on interest, they’ll understand why long-term saving can be magical!
Correct option is D - Insurance is one of the most essential tools for financial planning and preparedness. After all, it is not merely about compensation. Introducing children to the concept of insurance helps them understand life’s unpredictability and shows how despite this, with planning, things become easier. Whether it is an accident or damage, insurance promotes financial preparedness and reduces stress. This can also be used to start conversations about long-term thinking and planning, risk, and responsibility.
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