Coaching the next generation

We all invest a lot of money in the process. However, we are short of time and energy, in this hyper busy age. Many of us don’t have the time for spending time meaningfully with children, to play with them, tell stories, coach them on morals and way of life.

We do try to provide them the creature comforts and try to make up for not spending time with them. Then we also put our children through so many classes to help in their overall development into a well-rounded personality. But most times it is like throwing darts in all directions and hoping some will hit the bull’s eye! We want to make Jack Mas of our children, when we end up creating Jack of all…

Children today are in a fantastic place – they can get anything at all from their parents. This results in an entitlement mentality and reduces their ability to take “No” and causes problems for them in future.

In such a situation, parents need to be careful to help their wards acquire life & money skills to survive in the real world. The real world is not as cosy and forgiving like home.

The first place for parents to start is to help their children understand the value of money. We might have often encountered children saying that the pizza is only Rs.350 or that the shoe they want costs only Rs.3,000!

Since parents take care of everything & fulfil every fancy, children have no idea about the value of money. Parents need to teach them. But how?

The best way is to approach from what is known. The child will understand how costly the shoe is if they know that they can buy burgers for the next 100 days for the price of the shoe! Or, say they can buy 20 dolls for the same money. This way the child understands relative value, based on what they already have.

Delayed gratification is another that children need to understand. It is not such a bad thing as it appears at first. If the child knows that it can buy a Casiotone, if it saves at least half the money, there is an incentive to save as also look forward to something that s/he always wanted. At the end of the wait, the child would have a sense of achievement and the Casiotone would be a prized possession. This also inculcates the habit of first saving and then buying instead of flashing the credit card and landing in a mess.

Children also need to learn about Constraints.  They need to understand what they will do if they have a limited amount of money. Will they buy the Casiotone or will it be a Sony PSP? They need to decide. In life, we rarely can buy everything we want & it is better to learn that early on.

Also, the concept of making your money earn should be understood by children. The target sum will be achieved by investing a sum and allowing it to grow over time.

Parents can just invest in an Equity & Debt oriented investment for their children and allow Children to monitor the progress of the investment over time. Children will understand that Debt products give steady returns and Equity products can be volatile. They will also understand that, overtime, equity can give great returns. This can be the best finance education for them.

Children should understand estimation of spends, budgeting and operating within it.  When Children go for picnics, make them estimate their spends and draw up a budget. Encourage them to stick to the budget & track all that they spent. On return, check whether they have been able to stick to the budget. What they have left, allow them to keep it & top it up to the same extent from your side. That will be an excellent positive incentivization for their compliance!

Encourage them to do proper analysis & research before they buy any product/ service, instead of slavishly going with what their friends are doing. This will give them a sense of self-worth, individuality and control. This one habit will save them a lot of money, which they will appreciate very much, especially if they need to operate within a budget. This will also eventually position them as an influencer in their peer group, which will be an added sugar rush for them!

I have largely stuck to the financial angle here. I can go on. But I have promised myself to keep this one short, in deference to some who want short posts!