Getting exposure to the nuances of personal finance needs to be an ongoing practice throughout childhood; only then will today’s teenagers be better prepared to sail through the ups and downs of entrepreneurship
India’s over 200 million youth and teens spread across urban and emerging cities are becoming financially independent earlier than ever before. As young consumers, they are opinionated when it comes to their personal life and the choices they make, whether it is related to gadgets, fashion, food or travel. It comes as no surprise to see that 93 per cent of teens express an innate desire to learn about digital payments, with just a meagre 22 per cent of them being confident of using digital payments (source – Consumer survey co- compiled by Muvin and Mompresso.com). The root cause of this issue has been prevalent for decades in India – the fact that at both school and undergraduate levels, there is no focus on the subject of understanding personal finance. This means that in some cases, parents take up the ownership of teaching their teenage children about money, while in most cases, the teenagers are left to ‘figure it out’ themselves.
India continues to witness a rise in entrepreneur led ventures which in many cases are backed by investors and mentors who not only back young entrepreneurs with funding but also help them hone a mindset to lead a new venture. As per the Global Entrepreneurship Monitor (GEM) India Report (21-22), India’s entrepreneurial activity expanded in 2021, with its total entrepreneurial activity rate (percentage of adults aged 18–64 who are starting or running a new business) increased to 14.4 per cent in 2021, up from 5.3 per cent in 2020. At the same time as per industry estimates, 10 per cent of startups wrap up operations in the first year of the launch, with almost 70 per cent of them doing so during years two through five years of inception. Almost 29 per cent of them fail because they are not able to manage sufficient funds to run their business.
This is why it is crucial for young entrepreneurs to understand what creates failure and learn those lessons early on and shorten their learning curve. Early exposure to financial management allows teenagers to learn early when there is not too much at stake. They can also learn from their parents’ experience and perspective. Let’s understand how this issue can be looked into.
Lead by example to raise the entrepreneurs of tomorrow
Leading by example becomes important when parents decide to teach children about money from a young age. Research shows that individuals learn most effectively by doing, hence the imbibed knowledge is more likely to permanently sink in amongst children via hands-on learning experience.
The difference between needs and wants
While building a venture, an entrepreneur needs to be mindful of when to cut the unnecessary by understanding the difference between wants and needs. Similar to an entrepreneur keeping track of records across multiple accounts, parents should assist children to save their pocket money and allowances for different objectives – especially in scenarios when they simply crave to satisfy a material desire, which may not really be needed. In the long run, this would inculcate the skill of letting go off short-term gratification by preserving for something more important.
Putting learning into action
Parents should consistently encourage their teenage children to put what they learn into action. Peer to peer relationships are an integral part of a teenagers’ life. These young minds are often committed towards reaching their goals- even if initially they are all materialistic in nature and this is where they experience financial independence in a fun manner. If they choose to save their allowances in tandem with a sibling or a friend, they end up learning life skills pertaining to teamwork and coordination- which are vital in a possible futuristic scenario of being entrepreneurs.
At the end of the day, it’s important to remember that getting exposure to the nuances of personal finance needs to be an ongoing practice throughout childhood. Only then will today’s teenagers be better prepared to sail through the ups and downs of entrepreneurship. Essential skills such as critical thinking, and ensuring financial stability when learnt early on empowers young minds to be better prepared for handling any business or career path they may end up pursuing as adults. They are the ones who are more likely to make sound investments and financial decisions in the long run.
