Your financial plans change on the day you discover a child is on the way. But are you equipped to understand child psychology and its impact on your financial planning for life?
Let me tell you about my first brush with an indisciplined, not-so-money-savvy kid. My 12-year old niece moved from a small town to a school in Pune. We happened to be her local guardians. She first observed that we get things free, since we don’t pay in cash, but just swipe a card. The next issue started with never-ending demands and brusque remarks about getting the money from her Dad.
The child is not schooled to be money savvy. And it adds to the problems of all those who associate with the child. Isn’t it a familiar story we ‘ve heard at some point in life?
5 SENTENCES TO SUMMARISE WHAT PARENTS THINK ABOUT CHILDREN AND MONEY
Our social and educational system does nothing to prepare us for parenting. It explains the rise of umpteen parenting courses springing up. It’s happening more so after the pandemic. Parents are now compelled to deal with the kids for 24 hours, without support from teachers, tutors or daycare facilitators.
We will only talk about children and money here.
I summarise the parental mindset in five bullet points.
- They are too young to understand financial problems. Why burden their childhood?
- I don’t want my child to go through what I did in early years.
- We need to keep up with the Sharmas or Shahs or Shetty’s.
- I can do anything to see my kids happy.
- They will never forgive me, if their future is compromised for a small problem of mine today.
This is short-term thinking, and under-estimating the capacity of a child to learn. The problem is we don’t take the trouble to teach them life skills. They are too busy learning school subjects and indulging in trendy pastimes.
A common thought process
A child’s future is compromised, if you don’t have enough money to pay for expensive courses today.
A child’s future is compromised if you don’t have enough money saved for their future, or if the children don’t know how to handle money.
We hear of celebrity kids taking a bus to school or college. The parents make them experience an average life, before they get swept away by glamour, fame and wealth.
Let success happen at its own pace. Meanwhile, teach them to work for the best, and be prepared for the worst.
5 THINGS THAT CHILDREN NEED TO LEARN ABOUT MONEY
1. Understanding the Money Cycle
Money is not just about spending. It goes through a cycle of Earn, Spend, Save and Invest.
2. Immediate gratification is a spoiler
The Marshmallow Test kicked off the studies on emotional intelligence. You tell a kid they can take one marshmallow now, but they get two if they wait for an hour.
The ones who had the patience to wait showed better progress as individuals in later years.
3. Planning is crucial to success
One needs a plan to spend money, as much as it is needed for scoring well in exams or winning a match.
4. Budgets and Value of Money
Resources are limited. Wants are unlimited. One has to choose between two things at times. The choice is based on comparative value of those things.
Budgets are based on what is needed immediately, and what can wait.
5. Peer pressure
Peer pressure is a strong reason for indulgence. They feel compelled to have what their friends have. Do they ever count what they have, but their friends don’t?
Counting your blessings can be a huge influencing factor.
Successful people set their own rules.
Are you ready to take your kids through a journey of financial awareness and literacy?
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All the best!