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I remember when my father at the age of 13 took me to the bank (Bancomer, at that time), to open a debit account for me. Outside of the Bancomer logo at the time, which was quite ugly — a little flag divided into four juxtaposed squares of yellow and green — the product was good: a card for children that encouraged savings . It was when I made the transition from being kept in a piggy bank to formal savings in a banking institution. This early indoctrination to formal finance , which may seem trivial, led me to become more comfortable with financial products as an adult.
I never thanked my dad for the financial education he instilled in me, but in Mexico, we depend on our parents for it. You see, a great lack in the curriculum of education in Mexico is financial education . If your parents aren’t teaching you the fundamentals of healthy personal finance, you’ll have to learn them yourself, sometimes making costly mistakes that could have been avoided. The sad thing is, in general, personal finances are not complicated, and a few simple tips can go a long way. Few subjects – with the pardon of biology and chemistry – can have as much influence on your quality of life as basic knowledge of personal finance.
Now, as founder of a Fintech credit (Prestadero), I have lived even closer. The financial inclusion problem that Mexico has is not due to a lack of supply (and now less with technology), but rather due to an opt-out due to lack of financial education. “If I had a good credit history, I would not be asking for a loan,” some clients have told me; “Where do I have to deposit to get the credit?” Some others have commented to me, as proof of the great lack of financial education that we as a country suffer. If you read these questions and do not understand aberration, then it is very important that you catch up on basic personal finance knowledge.
My father did not stop to get me a “junior” card, he also taught me the importance of creating a credit history early, helping me to process a credit card as my guarantee at 20, and even opening an investment account, where I could buy and sell shares on my own (at first, I asked him to buy “x” shares from his account, and later I opened mine).
Steps to give your children financial education
Now, as a father, I know that I have the responsibility to convey to my daughters the importance of having healthy finances, and if I had to summarize what I consider most important to convey to them, it would be the following:
The Discipline of Savings (from 6 years old)
Saving gives you freedom and reduces stress, preventing you from living from day to day. Saving gives you the peace of mind that, in case of an emergency, you can solve it.
The Compound Interest (from 6 years, although you can open an account before)
The great advantage of saving as a child is taking advantage of the wonder of compound interest; that is, the returns you generated a previous year are included in the calculation basis for the returns for the current year, and so on. The great friend of compound interest is time, and it is something that cannot be replaced. So the sooner you start investing in instruments with compound interest, the better.
Credit History (15 years and older)
Your credit history is your letter of introduction to an institution to obtain credit. Credit is an invaluable tool that, used well, can drastically change your well-being. If you do not know how to take care of your credit history , you will not have access to this tool. Even with the new technological methods for determining credit risk, you will not only be subject to a credit or not, but the conditions of this can be very different if approved. That is, previously, especially in consumer credit, if you were approved you had the same conditions if you were an excellent payer as if you were an acceptable payer. Now, the differentiation of grantors and technology has made the terms directly dependent on your specific credit behavior.
The Credit (from 15 years onwards)
In this topic, there are many tips and variants, but among the most important are: knowing how to differentiate between the cost of a loan vs. another (for example, who knows what the Total Annual Cost is); knowing how to differentiate the type of credit you require (you will waste your time if you request a business loan from an institution that only grants personal credit); and be careful with credit cards (the importance of being a totalero).
The advice must be reinforced and it must be proclaimed by example. Your children will hardly be able to understand the importance of saving if it is not practiced at home, for example. Hopefully in the future education in Mexico includes mandatory courses in personal finance. Meanwhile, it is up to us, the parents or guardians, to transmit to our children the knowledge and fundamentals in this matter that, yes or yes, will drastically affect their quality of life.