Privilege versus value of money
A dinner conversation with friends led to talks about the extreme, uncertain state of the world. A two-year pandemic, followed by an armed offensive by one the largest militaries in the world, floods, natural disasters warranting evacuation of entire cities are all events that end up disrupting people’s health, wealth and anything in between. One parent revealed, how if faced with such situation of strife in future, they have decided to use their financial privilege to protect their adult child (overseas) at the slightest whiff of trouble. As a parent, the inherent need to protect your offspring is understandable. At the same time, protecting your child is not just about providing ready access to a pre stitched financial cushion, rather it’s about teaching them the importance of financial independence.
Many parents of privilege today, came from humble backgrounds and have reached this stage only by taking some very calculated risks and by making smart money decisions. Then why not pass on this skill, not just the money? The skill to make smart money decisions, that’s timeless and invaluable.
RAGS TO RICHES OR RICHES TO RAGS?
There are ample stories of celebrities and entrepreneurs who had nothing when they began their journey and went on to gain fame along with financial success. When children hear these stories, they feel encouraged and motivated to try and follow a similar path. However, there is a flip side to this. Stories of those who go the other direction - from riches to rags. These are the stories which are often not told but should be. Often the focus of privilege is on spending limitlessly, with an assumption that no event can disrupt the flow of income. But life is full of uncertainties.
An untimely death or disability of the primary earner has the potential to disrupt every assumption made till date. So, instead of letting your children rely on the faulty idea of a pre-stitched financial cushion, it’s important for them to understand how to make money work for them.
FOCUS ON DECISION MAKING
Giving your child the tools for survival is less about money and more about empowering independent money decisions. Recently, when my 11-year-old went to buy a drink from a vending machine, he had three options. His final choice was based on taste, cost and what mom will allow! The relevant point is that he compared costs for the two shortlisted drinks and decided it wasn’t worth paying Rs 10 more for a popular drink and settled for a lesser known brand of chocolate milk drink.
The decision to pull your young adult, offspring away from a place of crisis, should not be yours alone. It has to be made with them, in light of the circumstances that they are in and after assessing whether they can manage that risk themselves or do they really need saving?
Empowering your child is the true protection. Teach them to earn, save and invest early. At the same time, teach them to use their money in a way that lets them indulge in what brings them happiness. The ability to make independent financial decisions early in life can help your child remain confident even during a crisis.
In Morgan Housel’s words, there is no way to learn the value of money without feeling the power of its scarcity. By letting your child make their own money decisions and fail, you are protecting their future financial health.
Author- Lisa Pallavi Barbora
(As published in IPRU Insights)