5 Reasons Why Financial Wisdom at an Early Age is Crucial

For a lot of us, financial wisdom comes at a relatively advanced age, after having gone through a lot in life ourselves. But things need not be that way; the earlier we gain financial knowledge and wisdom, the more useful it proves to be, later on in life.

Apart from school and family, there are a number of ways to gain financial wisdom at an early age, but they are often overlooked. A simple Google search can bring up a wealth of practical, straightforward information that’ll prove useful for years to come. Not only that, but one can also turn to books, courses, and seminars.

In this article, we share 5 reasons for which it is clearly vital to gain adequate financial wisdom at an early age in life. Continue reading to learn more.

Propensity to Save

Those with enough financial prudence early on are the ones more likely to value money and therefore use it judiciously. Such a cautious approach ensures adequate savings for rainy days.

Otherwise, especially in our youth, the temptation to get carried away and spend rashly is always there. Peer pressure often plays a critical role where we give in to what others are doing and follow down the same path, even if that may not be the right one.

Power of Compounding

Money kept invested can grow at exponential rates. To cite an example, a nominal investment made in Apple shares during its IPO in 1980 would have increased 50,000% in value by 2018! There are many such examples that one can think about. In the context of the Indian market too, there are instances galore.

In fact, in many basic cases – even money kept in regular savings schemes such as PPF, the amount increases incrementally when it is kept invested.

In the context of youth, this factor is very important since investments made early on, rise to significant levels fairly quickly – when the funds actually prove useful. So, for instance, if you are able to save and invest even a relatively smaller sum by age 18 and stay invested till age 28 – when you get married perhaps, that money would have grown quite a lot in those 10 years.

Entrepreneurial Spirit

Yet another powerful reason for financial wisdom to be crucial at an early age is the way it brings along an entrepreneurial spirit. If you read the story of business magnate Warren Buffett for example, you will find that he started his entrepreneurial journey really early on, and the rest is of course history!

Not everyone can rise to such monumental levels but by gaining financial wisdom and prudence at an early stage in life, the propensity to get well-heeled as far as entrepreneurship and developing a keen sense of business is always there.

Financial Wisdom at an Early Age
Parents can play a crucial role in ensuring that their children develop adequate financial wisdom and prudence at an early age. Image Courtesy – Sunday Post

Financial Prudence at a Later Stage in Life

A big advantage of developing financial wisdom at an early age is that it invariably leads to reasonable financial prudence later on in life. For instance, such children tend to grow up as better money managers and far less likely to have money problems or get into excessive debt.

The thing to remember is that financial wisdom in life does not come too easy. It has to be inculcated, with parents/family often playing a crucial role. With that in place, there is every chance that children will eventually grow up to be better money managers.

This proves really useful when these same children grow up to become adults with families – and responsibilities, of their own!

Early Financial Wisdom Prepares us for Uncertain Times in the Future

There is absolutely no doubt that we are living in really uncertain times. If you compare your own life with that of your parents, you will find a huge difference; with an entire generational change and just too many differentiating factors.

They grew up in an era sans the Internet, social media, and many other things which we reckon to be very challenging to live without. Further, inflation has increased tremendously, with the overall value of money decreasing dramatically; 100 Rupees, for instance, has very little value today as compared to what it did in the 1980s or earlier.

When you are financially wise at an early age, you are better prepared for what may well be a number of different uncertainties coming your way later on in life.


Financial wisdom at an early age is crucial. Every attempt should be made to gain such wisdom as early as possible to ensure appropriate money management in the future.