“Financial” Parenting- You owe something to your children

(I had come across this wonderful term in the late nineties, in some research publication of Morgan Stanley Dean Witter. The topic was of educating children on finances. And also the dilemma of how will you motivate children who will want for nothing, whose errors are easily covered up financially and who have no need to work for a living. This piece of mine talks about some experiences I had.. This was published in the Deccan Chronicle of 29/30 July 2018)

FINANCIAL PARENTING

 Our academics are interesting. We learn so many subjects and then finally land up in a job of profession where just one segment or fraction is actually useful. And Indian kids have been brought up to think that if one does badly in the holy PCM (Physics, Chemistry and Mathematics) one is a duffer. Everything is focused on earning money, providing for the future and improve the standard of living. Once we are past the academia, it is money that plays the biggest part in our life.

And our education system does nothing to help us. As we grow in to our lives, focused on our career and on money, we pay little attention to what we do with our money and what are the possibilities, the risks, the opportunities. In the wonderful book, “Rich Dad Poor Dad”, Robert Kiyosaki says:

“If you are going to build the Empire State Building, the first thing you need to do is to dig a deep hole and pour a strong foundation. If you are going to build a home in the suburbs, all you need to do is pour a 6-inch slab of concrete. Most people, in their drive to get rich, are trying to build an Empire State Building on a 6-inch slab”.

Investment and money matters have to be taught when one is a child. By the time one grows up, that lesson has less impact. If you read about Warren Buffett, he started to buy shares when he was eleven! He was handling money, earning money even before then!. He could build the tallest Empire State Building ever, in terms of wealth.

Every child matures at a different rate. Start them young on matters of money. This will also get rid of their fear of numbers or ‘innumeracy” which afflicts a vast majority of us. Generations have progressed from lack of money to becoming wealthy families. There is a natural tendency to protect the young. We want to ensure that they are not hurt by failures. We are around to do their every bidding. Every wish and want of theirs is fulfilled. With so much going for them, what will be their motivation in life? What will be their reason or excuse for a meaningful or purposeful life?

Our education system is unfortunately in a permanent limbo between politicians at the states and the Centre. Thus, any real life lessons will have to come from parents. It can realistically commence from that generation of parents who have fulfilled the common needs like housing and are giving their children a good education. Start the children early with money. While my father had not bought a house and we were in poor circumstances (even the five rupees a month fees was always in arrears) he taught me the importance of money. I was given the monthly cash and told to manage the household. My mom was the guide to spending frugally. It was when I learnt tremendous respect for my mother who seemed to make the rupee stretch so far. I had to keep tabs on expenses and my dad would keep discussing with me. My dad had a failing business and I learnt to write books of accounts while still in school.

Each one of us should start our child early.  Maybe my first salary was a princely sum of Rs.500/- and it was closer to my retirement that I started having ‘surplus’ cash flow to invest. However, I am sure that my children’s’ first paycheck would be bigger than my last one. If I have given them everything, then the money will be burnt in consumption. The fault will not be theirs. It will be mine for not having taught them the ‘value’ of money. Today, if I take a ‘dipstick’ survey of teenagers, I am sure that nearly ninety percent will not know of ‘compound’ interest! We parents have sheltered them from all bother.

Discussing money with children, explaining to them the basics of a bank, a fixed deposit, a mutual fund, of shares etc are good things. You could give them money to buy shares. No better motivation if you can afford it. However, you will fail if you just give them the money and not discuss outcomes. If you are shy or innumerate yourself, have a good friend teach them the basics. Let them handle the household budget. Pay them for meeting goals.
The US has DECA (https://en.wikipedia.org/wiki/DECA_(organization) ) . We do not have anything like this for children. They also have the ‘stock market game’ (https://www.stockmarketgame.org/ ). I even recall the US Federal Reserve had comic books outlining the workings of the banking system!!  These are wonderful initiatives that help in financial literacy. Till such time we have such things in India, parents will have to be the financial teachers for their children. Most of us are financially illiterate. Let us not condemn our children to continuing the tradition.