Three personal finance lessons you wish you learned in school!

We all understand the impact and importance of having a proper set of money values in place. But how many schools make a conscious effort to inculcate them in their students from an early age? After all, science tells us that neuroplasticity is highest between ages 7 and 14 – wouldn’t it be great if we could learn some key investment planning lessons in that critical life stage, so that we could subconsciously carry them with us throughout our lives? Here are three of them which you may want to teach your kids!

Effort/Reward correlation

Fact is, that there are no free lunches when it comes to investment planning , and we will all really need to strive hard in order to create wealth, one way or the other. Not just that, the degree of payoff is proportionate to results, effort, or a blend of both. How can you inculcate this lesson in your school going children? Here’s an example. You may promise them a really expensive phone if they score a certain grade, but a lower model in case they score a notch lower. When the crunch moment comes, make sure you don't go all soft and yield to their demands! This is a valuable life lesson that will teach them to work hard for their money. If school going children start feeling that it’s “easy” to acquire the finer things in life, they may well carry this learning into their approaches to investment planning later, and be subject to some painful lessons from the “school of hard knocks”!

Delayed gratification

Multiple studies, including the famous marshmallow experiment conducted at Stanford, have proven that individuals who are able to delay gratification in exchange for higher payoffs at a later date, do a great deal better in life, overall. Unfortunately, the quick fixes that are available to today's typical school goer end up steering them in the opposite direction. It would be a wise move indeed to inculcate this ability in school children, by promising them better "payoffs" if they are able to wait. To make the process even more rewarding, schools can set up a process to earn virtual currency or some form of credits over time, for completing tasks or being at their best. These credits can later be “redeemed” at a later date. The lesson of delayed gratification will prove extremely valuable in the future, especially when it comes to achieving financial goals through systematic investment plans – an endeavour that could last for years or even decades before paying off.

Risk and Reward

Go beyond piggy banks and teach your school going children some real investing techniques early on in life! For instance, you could start a systematic investment plan  in their name, while keeping them in the loop about where their money is going and how it is expected to fluctuate in the short term but grow in the long term. When their fund value falls, explain to them how risk and reward are correlated, and how their interplay impacts their investment planning results over time. When it bounces back again, congratulate them for showing resilience in the face of rough markets. In doing so, you'll be grooming a very successful long-term investor who will be able to override her behavioural biases and really create wealth from their investment planning in the long run!