Teaching children about money

India is rapidly becoming wealthy. With rising affluence comes the struggle of raising children with the right attitudes. We all tend to give children all they want before they even say that they want it. Our children have gotten used to getting things very easily.

Hence, they do not value even thoughtful and expensive gifts by parents. A simple gesture of gratitude is what the parents expect which they may most probably not get. A perfunctory thank you is probably all parents can expect and be content with!

This is the story of our times.

However, our affluence and the enchanted life children tend to lead is creating a whole lot of problems!  This is an unintended consequence, but we will need to deal with it. We need to understand and tackle them in the best interest of our children. That is what we are going to discuss here.

Do they know how you got here?

Many of us have had humble beginnings. We have struggled and have put in a lot of effort & toil to get where they are today. They need to know that story.

Children need to understand that nothing comes on a platter. They need to appreciate the privilege they are born into and be willing to put in the effort to launch themselves into a higher orbit. Complacence should not be allowed to set in.

Have you taught them the right money scripts?

Many parents have put in wrong money scripts without their knowing it.

“If money is lost nothing is lost, if health is lost something is lost, if character is lost, everything is lost”, is a high-sounding moral injunction. However, the importance of money may unintentionally get trivialized in the process. This can show up as a cavalier attitude towards money, later in life.

Similarly, many might have heard of this – “Money is the root cause of all evils”. Such messages may produce all kinds of problems and the person may end up never really doing anything to accumulate wealth!

We need to expose children to right messages that will help them understand money in the right context. Something like “Money is a means to an end, not an end in itself” could be a message that should position money rightly, without overstating or understating its importance.

Are you accidentally setting them up for financial ruin?

Parents routinely shield their children from any monetary jolts and ensure that they don’t feel the shock waves. They do not want to expose their children even to temporary tight situations and do not discuss it. This results in a false sense of well-being and ignorance about the rough and tumble that life really is.

Being over-protective is bad for children. Nothing grows in the shade of a Banyan tree. They should be allowed to be exposed to a normal life, understand the ways of life, and even take some knocks. That will stand them in good stead and prepare them well for a life well lived.

We need to make children work within budgets on various things. They need to know the choices they need to make and the compromises that is inevitable while making those choices.

Children who are used to good lifestyles, may find it difficult to maintain it when they start earning. Unfortunately, most do not know to adjust their lifestyles in consonance with what they earn. This results in children being dependent on their parents into their thirties, which is ironical! On the contrary, one would expect such privileged children to launch themselves to higher orbits based on the advantages conferred in their childhood!

Parents need not fund fantasies of children

Many children have an exalted sense of privilege & entitlement.  From buying top of the line brands to travelling in plush cars to flying around, global holidays to expecting parents to fund foreign education is taken for granted in case of many children.

Parents tend to cater to their whims most times, as they can afford them. Sometimes they even stretch to fulfil the wishes that are hard to fund – like an education abroad.

At the appropriate age, parents need to explain the family finances. They need to lay down what the goals are and which of those goals they will fund. They need to be clear on how much they may fund goals like education abroad.  They also need to clarify about what they will do with their wealth.

Establishing that early on is important to set right expectations. Also, establishing certain boundaries on what they can expect from them and the choices they would hence have to make should clearly be articulated.

Position money rightly to children

Money is important and many parents want their wards to pursue a certain vocation to earn well. However, the child may have other interests and may want to pursue some other path. Parents need to play a constructive role here. Parents cannot vicariously strive to achieve what they themselves have not been able to and drive their children crazy. It is just not fair.

Money is a means to an end, not an end in itself. Parents need to understand this too well and allow their children to pursue what will give them happiness and satisfaction.

It is OK to earn less money if what the children are pursuing is fulfilling to them. Ultimately, it is the life of another individual who has a right to carve out his/her path.

Parents should take the pressure off them and help them reach their potential.

Allow children to handle money/ finances early on

Exposing children to the basics of finance early on is a good idea. Giving them pocket money with which to manage all they want is not very popular with parents. Parents feel that they are crimping the lifestyle of their children by giving them a limited sum. They feel very guilty about making children manage within a budget.

However, this will be an invaluable lesson which will teach the children about budgeting, prioritizing & managing their money needs.

Help children understand how delayed gratification can help them be financially better off. Teach them about how loans work and in what situations to consider taking loans.

Parents should encourage children to even invest money on their own, in a small scale. This is for them to get a feel of investing, make mistakes and learn so that they are prepared to handle their money when they start earning. This will prove to be an invaluable lesson on investing and creating wealth.

Parents have a duty to teach the children about finances and develop the right attitudes and habits with respect to money. If this is ignored, all the other good work they have done in various other areas may come to naught. That would truly be tragic.