Children and Money: The Basics

I was reading an interesting article by John Rosemond, a noted American columnist, public speaker, and author on parenting. He had asked a married couple who had three kids, “Who are the most important people in the family?” And they answered, “Our kids!”

These days, all we see is doting parents ready to bow down to whims and fancies of their demanding kids. We might understand this emotionally as our need to provide our children with the things we were not given in our childhood. But have we ever introspected, was it because our parents couldn’t afford the things or was it that they were trying to teach us a lesson on acknowledging ‘NO’. Many of us have faced this ‘NO’ in our lives, but the key is just to move on. So, are we preparing our kids to accept rejection by giving them everything they want? Is this the right approach towards raising our Children? I don’t agree.

Even our Schooling System teaches everything to Children, except for making them understand the value of money. From where does this money come from? How it reaches the parents? And most importantly, how and where it must be spent and to what extent.

We teach our Children everything right from the good table manners to their behavior with elders and also discipline. We all want to bring them up as responsible citizens of the country. But, when it comes to teaching them about money management, we all give it a miss thinking he/she is too young or he will just learn or someone else will teach him. We think that this will come automatically in a child once he starts earning. This thinking itself is not correct. If we have been supporting our children from the very beginning without asking him any questions, how do we expect him to stop asking for our monetary support once he starts earning?

As parents we need to understand that talking about money to children doesn’t make them money minded. With this, they lose the fear or apathy that possibly many of them have in their 20s about having a financial plan or financial discipline. Parents are the best teachers for children. A child learns whatever he sees in his immediate environment looking at the behavior of his parents towards various things. So, if parents portray right example in front of their children towards the way they handle money, it is highly likely that going forward the child will have the same values.

One can start with the small things, taking your kid to the Bank or ATM, make him understand that money is a currency which is used for trade, you give money in exchange for something else. Giving him coins for counting, trading those coins with something he wants. It is important for parents to help children differentiate between need and wants. It is very important to communicate with children on money, how it is earned, how it should be saved and where it should be spent.

Once the child starts getting allowance, parents should always encourage him to save some portion for it in his piggy bank. You can do this by adding goals to his savings. Let’s say if he saves a set amount, he will get some gift or some treat or even some additional add on to his savings. This way he will be encouraged to start with goal oriented savings.

Once they start earning, parents should not encourage on giving Children extra amount thinking that he/she won’t be able to survive on the small amount as per their lifestyle. Otherwise, it might become a burden on Parents and this habit might eat into their retirement corpus.

Only if we start with these small efforts from our end, will we be able to make our Children understand the concept of money management.