Thursday, August 18, 2022

Kids and money

Children need to learn how to manage cash and be responsible for it.
My younger one was asked to write about her summer trip as vacation homework. And she told me about it when half of the holidays were over. So, I had to frantically look for any quick getaway for a day or two. Not to my surprise, I found that all vacation destinations were full. And why not! After two punishing years, we are now living a near normal life. Schools are on and streets are jammed. After a few calls to friends and family, I finally found a place to unwind for a couple of days. So we packed our bags and set out.
During the vacation, we met a few other families with children. These children were much younger than mine. What I found is that a few of them are in perpetual on-demand mode for things like toys or favourite foods. If you try to reason with them that the toys they are asking for are costly, the answer would be – why pay money, swipe your card. If you tell them you don’t have cash, they will ask you to go to the ATM and withdraw. I found this quite amusing.
Children learn more by observing. They are all keen observers and notice what their parents are doing. A concept that money is a limited resource is hardly understood, when they see you using your card. They think that the ATM machines are a never-ending source of cash. So when you try to reason with them that you don’t have the cash, they might think you are being lazy.
From an early age what we should do is to give them cash and make them responsible for their own decisions. They must understand that cash is always limited, even if you are lucky and wealthy.
What children love is to be in control of things. You will be surprised that they can do wonders if given full control of their day-today finance. Say, if you are holidaying, give them a daily allowance.
Let them buy things with that amount. But once they finish that, don’t give any extra.The idea is to let them become independent with their finances. Believe me, you will be surprised.
Another opportunity of teaching personal finance to children is during their birthdays. For this they need to be young adults. You give them a budget. And help them with it. How many friends to invite and what return gifts to give, it’s their decision. How much to spend on balloons and on the birthday cake, it’s their decision. If they want to buy a costly birthday dress, that means less money for cold drinks.
If they want a costly restaurant, that means less money for decoration. Discuss with them and be a part of the game. It’s not that you give them a budget and that’s the end of the story. The idea is to teach them that resources are always limited and how you negotiate with them is important. It will be time-consuming in the beginning, but with practice, you will see results.
As you progress, you can escalate the game to a higher level through pocket money. What dress they buy, which restaurant to eat at, how much to spend will all come under money management. Remember, through this, you are building your next generation which will not only be independent, but will also be responsible and will learn a life lesson at an early age, which many of us struggle even in the later stages of our life.
Dipankar Jakharia

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