Parents always wish the best for their children. However, parents require funds constantly to meet their child’s education and growing needs. Also, emergencies like the ongoing COVID-19 pandemic tend to come primarily unannounced.
This calls for one to become financially vigilant and adequately manage their funds to meet such situations. Loans are one prudent way to meet any financial emergencies. With many lenders in India now offering personal loans at attractive and affordable individual loan interest rates, it has become easy to avail of loans.
The fast-paced lifestyle and uncertainties have also made it necessary that parents educate their children about the importance of money management and personal finance.
What is a Personal Loan?
A personal loan refers to an unsecured collateral-free loan that can be availed for various purposes, including education, marriage, medical, and the like. Most lenders provide personal loans for a period ranging from a few months to a few years, provided the borrower meets the personal loan eligibility criteria.
Key Benefits of a Personal Loan
- An instant collateral-free unsecured loan
- Attractive personal loan interest rates
- Personal loans for education have a moratorium period
- Hassle-free paperless documentation and easy approval
- Loan on approval is directly credited to the borrower’s bank account within a few hours
- A good credit score ensures better loan terms
How can you educate children about Personal Loans and their uses?
Most parents teach saving habits to their children. However, educating them about spending and loans is equally essential. Children should be made to understand that unnecessary expenditure needs to be avoided. Parents should make them understand the importance of repaying a loan on time. For instance, parents of teenagers can provide a credit card, asking them to maintain a proper spending budget. Parents can also teach them the importance of timely payments and the interest on late payments.
Children also need to be aware of the different types of personal loans available to suit their needs. Parents should also teach them about the individual loan eligibility requirements; in the future, they will require loans to fund their higher educational needs.
Parents can create personal finance situations at home to help them understand the concept of lending and borrowing better. For instance, they can occasionally borrow from their children’s allotted pocket money. Then, they should try repaying it within a fixed tenure with interest. If a child requires something that cannot be brought with their pocket money, parents can introduce lending. Show them how to manage with their allotted pocket money.
Parents can open a bank account for their children, which will be allotted a fixed amount for a certain period. They can ask their children to manage their monthly allotted allowance prudently. If they manage to do so, reward them, like how interest is paid on loans, by crediting the money in their bank account. This will help children understand how money such as a personal loan borrowed generates interest.
Making money topics attractive will make children understand the concept of a personal loan, how it can be raised, and its many benefits in a better way, especially if they are not old enough to understand complicated loan terms.
For children who can understand financial matters, parents can also ask them to visit credible lender websites like TATA Capital, wherein they can understand everything about personal loans. Tata Capital even offers a personal loan eligibility calculator, enabling borrowers to personalise their fund requirements. Further details on a personal loan can be availed by visiting TATA Capital.