“But dad I need more money to go to café coffee day, I cannot concentrate without their coffee”.
“Again? Just yesterday you went there. Too much coffee is not good for you and it costs a lot too”.
Daily this kind of conversation with his15 year old son Aditya left Mr. Sharma in a puzzled state because he couldn’t figure out a way to deal with this situation. He feared that it will impact Aditya’s health and it’s also a waste of money which Aditya did not understand at that moment. This had been going on since last two months in the Sharma household. Mr. Sharma was in a fix. How to make his son Aditya understand the value of money and also the consequences of having daily coffee on his health. It is important to make children responsible for their own lives and also to teach them to manage their finances independently. But the question arises how do we do that?
On a Sunday winter afternoon Mr Sharma along with his wife Nandini and son Aditya went out for a picnic at Lodhi Garden with their family friends Mr Chopra, his wife Sunita, 6 year old daughter Sara and 13 year old son Ayush. They spread their mat in the garden and sat. The kids got busy in playing badminton and the parents were chit chatting under the sun. Mr Chopra felt that something was bothering his friend and asked him. Mr Sharma discussed about Aditya’s daily coffee habit with him.
To this Mr Chopra said that “Aditya can be given a fixed pocket money to spend on a weekly or monthly basis.Be frank and straight forward in telling about your financial condition to your child. Sharing about finances – earnings, expenses, savings, insurance and your affordability of things creates an open space with the child. Some parents feel like protecting their children from the harsh realities by not sharing with them the financial conditions of the home. The intention here is not wrong but contrary to what many parents may think, children actually understand when we tell them what is affordable and what is not. Accordingly a pocket money amount can be set for the child. I have done this with Sara and Ayush. As a result, Aditya will stop asking for money for his daily coffee at cafe coffee day and also develop a habit of saving”.
“Hmm you are right Chopra, we must try this” said Mr Sharma looking at his wife Nandini.
The kids came running and sat with everybody. “Let’s play a game of monopoly” said Aditya. “Monopoly? What’s that?” asked Sara.
“It’s a game of business. Here look at this board,players move around this board buying or trading properties, developing their properties with houses and hotels, and collecting rent from their opponents. The goal is to drive them all into bankruptcy leaving one monopolist as the winner. He is the one in control of the entire monopoly in the end”.
Everybody started playing the game. Mr Sharma got an idea and said to Mr Chopra that “Board games like monopoly and business are also a fun way to provide financial education to children. Using different investment strategies for growing assets, saving and spending wisely can be taught through such games”.
“Yes and also teach kids the value and power of earning money rather than being entitled to it automatically and getting it freely. For example I encourage Ayush and Sara to help around in the house; help in my professional work also like printing and designing in return for an allowance. Ayush has also started a small business venture; he has opened a library at home. These are great ways to instil the power of earning in them. Children can accompany parents in small acts like withdrawing money from the ATM, depositing money in the bank, making investments etc. Explain to your child that the money in your bank account and in the ATM is earned after working hard. You can even show them your bank statements and teach about deposits and withdrawals. Why to hide such things from our own kids?”
To this Sunita added that “Going shopping with your kids especially for their own shopping teaches them how to save money while comparing prices according to your budget. Comparing quality, price, benefits etc. can be a good starting point”.
“Wow Sunita that’s a brilliant idea. Also I feel that as parents we are an example to our children in how we handle ours and our family’s expenses like paying electricity bills, buying health insurance and other such spending. Involve your child in family finances in day to day life like buying vegetables, stationary, household items etc” said Nandini.
Parents have the best of intentions in their mind when they teach their children about good manners, personal hygiene, maintaining relationships etc. but rarely do they talk about teaching good money habits as they themselves don’t know from where to start. As a result most children grow up into adults who can’t properly manage to save, spend and budget. No one really instilled the value of money until we began to earn. It’s a good idea to start teaching children about money when they are young. Teaching about money habits is more than preparing them for an employment in the future or about savings and investment. It’s about telling them the positive and negative sides of money and to aware them about the commercial and consumerism sides of the world.Financial education for children is an on-going process not a one time event.
So, how do parents start this process?
1. Start early with savings. Open a savings bank account for your child as soon as he/she is born. Consider depositing all the cash gifts that your child receives in this account to build a solid financial base as he/she grows up.Warren Edward Buffet, the most successful investor in the world, bought his first stock when he was only 11 years old and looking back he wished he had started much earlier.
Piggy banks are a fun way to start introducing children to money. For most of us, first experience with money came in the form of a piggy bank. Filling the piggy bank with money saved from pocket money and monetary/cash gifts makes children to feel a sense of ownership and independence in deciding where to spend that saved money. Parents can expand the notion of piggy bank by creating separate saving, spending and sharing money boxes. Each time the child gets some money from pocket money or cash gifts they can divide it into the three boxes. The spending box is for small routine expenses like buying toffees, chocolates, spending at the school canteen etc. and the savings box is for larger and long term expenses like video game or buying gift for somebody. Use occasions to remind children about sharing with others who are less fortunate from the sharing box. This helps the child in learning to save and creating the idea of money as a finite resource. This simple exercise is a great way to give financial freedom to your child and making him/her understand about financial independence and value of money.