Opinion | Money lessons not child’s play

There are two kinds of parents I meet. One kind talks about their children’s spending habits, the peer pressure-linked expenses, the lifestyle costs. The other kind talks about how difficult it is to get their children to spend, how they actually have to set a minimum limit to their spending when they become young adults and how reluctant the children are to accept financial help after a certain age. What’s going on? How does one set of children grow up to be financially prudent and the other set will take hard knocks in their lives before they learn the importance of respecting money and what it can buy? The short answer is parenting. It’s what we do and not what we say as parents. Children watch keenly what we as parents do and say. They watch our behaviour and words. And at one point they begin to see the contradictions in what we say and what we do. That’s the time that most teenage rebellion sets in. And that’s the time money related issues too become another point of conflict. 

What works? It helps to have a common set of rules in the house on money and exceptions need an explanation. A good baseline rule is one that says: do I need this thing or do I greed it? That rule works for everybody in the house. Gadgets, clothes, cars—everything must pass through this filter. Once the need for a spend is clearly established, then comes the actual purchase. Plenty can go wrong here as well. I remember once when my daughter, then 10, wanted a relatively expensive pair of shoes compared to what she normally bought. The shoes cost as much as I was spending on my shoes. So is it okay for me to spend more just because I am bigger and control the money? That was the key question that was not getting fully articulated in that Bata store many years ago. Sitting in the shoe shop we had a short money lesson— your feet are still growing, the shoes we buy you right now will not fit in the next one year, my feet are fully grown and I will use these for at least four to five years. She saw the logic and happily chose the cheaper shoe. Her lower spend was not about hierarchy but logic.

Another good rule is this: what is the opportunity cost of this spend? Most children today may not have seen the inside of a bank, but know that money grows inside an ATM machine. Or magically sits in a plastic rectangle. When a wad of notes was counted out for a big purchase, the children would also look on round-eyed in times before plastic was so pervasive. That has changed. So we need to change our strategy. It helps to discuss opportunity cost of stuff as you make your spending choices. For example, upgrading a phone. Once the need for a new phone has passed the first need-greed test, then comes the selection. A smartphone cost ranges from ₹ 15,000 to over ₹ 1 lakh. Discuss with your spouse why you are choosing one over the other and what the impact of this decision is on your finances. Let the children be in earshot. It is far easier to pass their spends through the opportunity cost filter once they see you doing the same for your own spends.

But, how do I get my children to deal with peer pressure? Well, the same way that you deal with peer pressure yourself. If you give in to the desire of a particular car brand because your boss drives it or because somebody you benchmark yourself to is talking about it, then you have little ground to argue a child out of her peer pressure-linked spends. A lot of time parents use things that money can buy to divert, distract and cover up for issues that are simmering on other burners in a household. Just being aware yourself of why you are doing what you are doing helps with financially secure children.

I find that logic and truth are two friends of parenting, especially when it comes to money. Children like the feeling that you talk to them and not at them. They like the fact that their opinions matter, however tiny they may be. Money lessons are important, but don’t go so far down this road that they grow up feeling guilt even when making small spends. Treats and luxuries are great fun. Don’t take the joy out of what money can buy. It is a fine balance that we strive for. And it is okay to slip and fall sometimes, but just get the balance back.

Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation