Growing up in a middle-class family, one of the core values we imbibed was understanding the value of money. We were repeatedly told that money doesn’t grow on trees and that our parents worked hard for it. We were taught not to waste. We valued our possessions. I still remember a doll I was gifted by a fond aunt. And how heartbroken I was, when I inadvertently broke its leg and couldn’t fix it back.
But, as a parent, I find myself working much harder to instill these same values in my children. Whether it’s the increase in disposable income or spending power, the sheer variety of options available for our children’s entertainment, the increased peer pressure and one-upmanship to own the next new game or toy coupled with our need to fulfill every childhood demand, we are running the risk of raising a generation of children who have limited financial sense and awareness. Influencing our children’s financial behaviour is a parental responsibility. The sooner we begin, the better it is for our children. Research has shown us that financial awareness can be instilled in a child as young as three years of age.
Talk about money
Talk to your child about the concept of expenses and how everything has a cost. Tell him how you earn money and the things you spend it on. Talk to him about jobs other people do and how they earn for it. Let him see you handle cash at a shop. At a young age, the exchange of money for goods is a complicated concept. It’s harder to understand if you use credit cards all the time.
Don’t buy something for your child the minute she asks for it. If you enter a shop to buy a gift for someone else’s birthday and your child sees something that they want, it’s okay to tell her, “Not this time. We came here to buy a gift for X and that’s what we are going to do. Next time we come, we can buy something for you.” This teaches her that every time you are in a shop, she shouldn’t expect to be bought something. She learns to wait. In some cases, it may well be ‘Out of sight, out of mind.’ Or she may remember it a while later which proves she really wants it. If she really wants something, you can suggest waiting for the next birthday or Christmas and adding it to the wish list, rather than buying it immediately.
Define needs versus wants
Make a distinction between needs and wants. A water-bottle is a need, a necessity but an expensive, branded water-bottle with crystals on them is a want, a luxury. Teach them to think about what their needs are and what their wants or desires are. Discuss your shopping impulses with them. Be aware of your own choices. “Should I buy this pretty, purple sweater? Do I need it? I already have two sweaters.”
Model financial prudence
You are your child’s biggest influencer. They pick up their cues from you. Do you shop recklessly at sales? Do you order food for an army and waste most of it? Be aware of how you come across. Children don’t necessarily see the hard work that goes behind the splurging. They need to realise that your ability to spend is not limitless.
Encourage a minimalistic lifestyle
We tend to clutter our house with a lot of stuff, things we don’t need or given to us by other people. The more we have, the less value we place on them. Do a quarterly decluttering of your house and children’s rooms. Every three months, we sort through their books, toys, games and clothes and make three piles. Things they are still using, that they have outgrown or no longer play with and can be given away and things we want to keep as a memento or souvenir. This process helps them evaluate and make conscious decisions about their belongings. If they aren’t keen to give their toys away, put a rotational system in place. Every month, a set of toys is brought out and the others put away. By reducing the number of accessible toys, they will attach more value to the toys that are in their sights. This system also allows the children to enjoy the novelty of playing with their toys when they are brought back into circulation after a while.
As they get older, give them money to spend
Take them to the supermarket with you. Give them an amount and ask them to buy biscuits or fruits with it. Ask them to make their decisions based on what they would like to eat, how much it costs, how much money they have and quantity of food they get in return for the money. When they have to make these decisions for themselves, you are encouraging them to develop their own thought process about their purchasing decisions and factors that influence it.
Teach them to spend, save and share
When they get money as gifts or an allowance, encourage them to put it in three jars labelled Spend, Save and Share. The ‘spend jar’ is for small expenses like candies, chocolates or stickers that they might want to buy. The ‘save jar’ is for big ticket expenses. Encourage them to have a goal for the saving; something that they really want and are working towards. Make sure that it is an attainable goal and not ‘too out of reach’. If they have to wait too long, it can get frustrating especially for really young kids. The idea is to encourage them to save and keep them interested long enough to see the fruits of their labour. The ‘share jar’ can be for donations to a charity or if they want to buy something for someone else.
Don’t hesitate to have balanced, honest conversations about money with your children. Money is an important resource that we all use. They must learn to manage and respect money, not fear it. By teaching them initial lessons about the value of money and how to handle it, you are laying the foundation for future financial planning skills.