Money and your child

Money and your child

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According to a recent survey commissioned by Cartoon Network, Indian kids received an average of Rs. 258 as monthly pocket money in 2009, a sharp increase from Rs. 193 the kids received in 2008.

The Kid’s Lifestyle Research throws up interesting facts. Kids in Ludhiana receive Rs. 419 on an average and kids in Delhi receive Rs. 295 and in third place are kids in Bangalore with Rs. 290.

The slowdown has not impacted kids in anyway. In fact, parents were willing to cut back on holidays, but not on kid’s pocket money.

The whole exercise had me thinking on how just a typical kid would handle the issue of pocket money. [More...]

a. The Hedonistic Kid :

Blows up the entire pocket money on malls / small treats with friends / toys / other goodies. Runs out his Rs. 258 midway and takes a line of credit from his mom and gradually builds up an impressive outstanding balance. Mom and son / daughter soon have to sit down and negotiate the kid’s balance sheet and CDR (Child Debt Restructuring) gets underway.

b. The Making Ends Meet Kid :

Just about manages to hang on to her Rs. 258. Usually course corrects midway or balances books with help of friends. Such kids know the value of money, but also want to have a good time.

c. The Balanced Kid :

Has the equivalent of a household budget. Prioritises spending and is keen to save a sizeable kitty at the end of every month. Such kids know the power of savings. The act of saving and accumulating a corpus gives them a positive sense of accomplishment. Such kids are every mother’s dream and will grow up as balanced individuals who can delay gratification if the situation so demands.

d. The Financial Planning Kid :

Now, this is a mythical kid that I would like to see emerge. This kid goes up to her dad and has the following dialogue :

Daughter : Dad, thanks for the pocket money of Rs. 250/-. But I need to discuss something important with you.

Dad : Go ahead.

Daughter : I would like you to index it to something relevant, like your salary for example. Give me 0.5% of your salary at all times. Or increase my pocket money by a factor of 10% pa.

Dad : Hmm, sounds interesting. Let me think about it.

Daughter : I have one interesting win-win deal for you.

Dad : Now, what can this be?

Daughter : Of the Rs. 250 you give me, I will invest Rs. 200 every month in an equity scheme. It’s a risk, but its worth it if you give a matching contribution of Rs. 200/- . This amount is independent of the investment plans that you have for me, which I don’t agree with anyway.

Dad : What is wrong with that?

Daughter : The choice of investment for starters. You have invested in an Insurance scheme so that it takes the guilt out of you. I think you were impressed with the celebrity endorser as well as the clever name.

Dad : Nah…It combines Insurance with Investment. And once I invest, I will have complete peace of mind.

Daughter : OMG…you are saying exactly the same thing the advisor uncle said…Honestly, isn’t your term insurance enough. And the money you save on charges and fees may as well be given to me as enhanced pocket money.

Dad : But it is all for your sake, sweetheart.

Daughter : Thanks Dad, keep that dialogue with mom…I am cutting to the chase : Your company group insurance plus some term insurance will do just fine…just re-direct the savings into my bank account. I am in a hurry to accumulate wealth. I want to build my own Antilla.

Dad : Yes madam…what ever you say.

I know all of this is in the realm of fantasy. But one day, some kid may miraculously mutate into one helluva high integrity financial advisor.