Despite all the digitisation and availability of information, even now, in many Indian households, it is taboo to talk openly about money. This misguided practice was tested to the hilt a few years ago when the Government demonetised currency overnight and spouses living in the same house surprised each other with the amount of cash they had ‘kept safely’ for a rainy day.
Unfortunately, this lack of communication around money matters tends to translate to poor financial decision making by the younger generation in a family. Children witness this awkwardness around what can be called one of the primary resources contributing to our lives – i.e. money, and imbibe it in their own money relationship as they become adults.
Hopefully young parents today are learning from mistakes made in the previous decades. Not only that, with the help of many useful resources, parents can find innovative, productive and fun ways of engaging with children about money from an early age. In doing so, they will be able to build a healthy understanding of the value that money holds in our lives and also a culture of vetting money decisions before making them.
But, where should you begin? Is there merit in telling your children how much you earn or how much the house is worth or perhaps should you jump into the concept of investing and growing money? Not so soon. Children first need to grasp that money holds value and secondly that decisions about how to earn, save or spend money ultimately have an impact on the outcome they desire.
MONEY IS A FINITE RESOURCE
‘Money doesn’t grow on trees.’ This is a phrase I can relate to from my childhood, growing up in a typical middleclass household. With the opening up of our economy in the 90s, there was a sea change in what became available for basic consumption at affordable prices. Fast forward three decades, indulging your child’s desires is a lot less expensive. A toy car broke, replace. The doll’s hair is spoilt, replace. Cricket balls lost, replace many times.
It is not unreasonable to say that children have taken their ‘stuff’ for granted. This shows a different kind of communication gap; parents’ inability to refuse their child any material comfort they might desire. Truth is, even today, parents work hard to provide a comfortable living to their children. It’s unfair to have this obligation to buying the most unaffordable indulgences, thanks to communication ineptitude of the most basic fact, money is finite.
If you look around, there are many examples of people having suffered due to taking money for granted. A few years ago, news of celebrated tennis champion Boris Becker auctioning his trophies to pay off debt, sent shock waves globally. More recently, 12-time Olympic medallist, swimmer, Ryan Lochte went form earning millions to having very little to survive on owing to reckless spending. Narrating these stories in a casual way can help children to think about the notion that we don’t have an endless pot of money, being magically refilled.
Also, try to introduce the transactional value of money early in life. Let them make some purchases on their own, small things to begin with. This can start under your supervision when children are 5-6 years old. Nudge them to buy a candy or pay at the counter but don’t give them enough change, which will get them to ask for more. This act of asking for more immediately shows that there is a possibility, what they have is not enough. You can fall short.
Don’t shy away from telling them that something they want is too expensive. Nurtured carefully, eventually it can help create a desire to work hard for improving affordability, if that is the goal.
Even where affordability is not under question, there is merit in stretching unimportant, large purchases. For example, a Sony Play Station costs nearly Rs 30,000. This may not be a big spend for you, however, for a school going child this is still a lot of money. If you were to simply give it to your child when he/she asks for it, you have created no conscious sense of value that money holds. After all, the only effort required from the child’s side was to ask.
One way to create this understanding of value, is to delay the purchase. Let your child say save up pocket money or money from chores so he or she can make atleast a sizeable contribution to buy it. This activity is likely to stretch across months and in that time the desire to own it will ensure that they respect it more. Another way to do this is perhaps package it as a reward for an achievement which could takes time and effort. However, the pitfall with the second process is that your child may start to link money/monetary gratification with self-worth which has its own drawbacks.
So, try the delayed gratification route as much as possible. In some cases, this delayed action can influence the decision itself and over time you will find your child course correct if the requirement was frivolous, thanks to delayed buying.
These are first steps for young minds to recognise the value of money and then understand that it is finite. Seeing their savings grow to form a bigger pile will give them the satisfaction of having achieved something and if that translates to buying what they want, then that’s a bonus. The most important facet of both the above, is simply more open communication about money.
Communicate with kids about money, why money matters and why decision making around money need not be a taboo.
Author- Lisa Pallavi Barbora
(As published in IPRU Insights)