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ParenTalk: Financial Responsibility And Your Child

ParenTalk: Financial Responsibility And Your Child

How many times have you thought that it would have been better to learn about stock markets and mutual funds at school? I certainly have thought about it on more than one occasion. I am a 30-year-old with poor impulse control when it comes to spending money and thus have only a meager amount in savings. While I have now joined the minimalism bandwagon, financial literacy is still something I lack. I am sure; I am not the only one. Some time ago I saw a post on a parenting forum where the mum was celebrating that she had paid off the last penny of her enormous credit card bill. She had enlisted her struggles, posted a picture of the framed receipt, and vowed to never use debt instruments again. I shed a few tears of joy on reading that post and started reading up more about financial literacy for kids. I am sure that we could do without moral science lessons, but inculcating financial responsibility in kids is critical.

Being a homeschooling parent, I realized that a child’s primary source of education is home and it is pointless to blame the education system if we do not take little steps at home. It is important to talk about money management and not dismiss it as a topic too complex for kids. 

Why are financial discussions important in the early years?

My mum is proud that they never troubled us with financial worries when we were children and doesn’t want me to talk finances to her grandchild. Another friend thinks I am an overthinker pushing my child into financial discussions when it is time for him to think about Peppa pig and monsters. Let me be honest, I have had these doubts too. But countless hours of research and contemplation later, I think habits take time to develop. Looking at the saving habits of many adults, I think it is never too early to begin. Also, small discussions do not mean we are telling our children to invest their pocket money in the share market. Many of us have had to withstand poor financial decisions, and it is a good idea to save our children from making the same mistakes. 

Introducing the concept of money:

You do not have to hold an MBA book in your hands to talk about money management to kids. It can begin by just letting them know that buying anything involves money. Let them know what you do to earn money. As discussions unfold, talk about saving for adverse situations, saving for goals, and budgeting. A piggy bank is a fun way to introduce the concept. Let them identify a toy and help them save for it. Let them spend, if they wish, and later talk to them about how they digressed from their goal.

Little kids love pretend play. Think of scenarios that involve money and enact them with the child. For instance, you could pretend to be a shopkeeper at the toy shop or the mechanic who repairs construction vehicles. Offer services to your child and ask them for money. This way, the child understands that all products and services come at a price. These games can help you teach them many concepts, including the academic ones like counting, numbers, etc. When we play these games at home, my child insists on being the shopkeeper. I take this opportunity to be a difficult customer who bargains, refuses to pay, doesn’t bring a bag, or is too greedy. We thoroughly enjoy the discussions that follow. Older children can play games like monopoly.

Topics to discuss when talking about money

You do not have to sit with books and planned activities to teach them about money. There is no fixed syllabus either. Here are some topics that you can bring up in day-to-day conversations to lay the foundation of financial literacy:

The distinction between needs and wants: This is one topic that we have been discussing with our child ever since he started accompanying us to stores. It may seem complex but is easy if you believe in the concept. Remember, they learn better when you model the right approach.

Some things could be needs in your house while they may seem like wants to others; as long as you are clear about your needs, it is ok. In our house, we tell them that food, clothes, shelter, books, healthcare, and travel are needs. Buying newer clothes when old ones are still ok, comes under wants, and new toys are luxuries too. While all of us wish to fulfill all their desires, it is ok to deny your child that new car when they already have too many. You can explain the cons of overconsumption. We always talk about how it hurts the earth and the animals and it works for us.

It is also important to let them know your reasoning behind buying a new book or toy. You can talk about the purpose of the purchase and the gap it fills in an age-appropriate way.

Stay clear of character printed merchandise. Let them know that they already have a bottle or a bag and buying the one with barbie would be fulfilling a want and not a need.

Thinking before buying: This is a lesson that most adults struggle with and the result is impulse buying. I am that adult, but I believe teaching it to children can make way for a generation of adults driven by logic and not impulses. Tell them that they can give it some time. If they still wish to buy the thing after 2-3 days, they can have it. Most times, they will not want it anymore.

Let them earn, spend, and save their own money: The implementation of this idea will vary from family to family. My friend started giving her child pocket money when he turned 7. He is expected to save money and spend on wants like toys or a new pair of skates. I think piggy banks and pocket money are great ways to teach saving. However, paying them for regular chores is not ok. They must do the chores because they live in the house and not because they get paid for it. You can reward them once in a while for consistently doing the tasks but do not attach price tags to each task. You can however assign paid tasks to older children. These tasks are the ones that you’d otherwise hire paid help for like cleaning the car. You can also get them to pick up simple jobs like helping the neighborhood kids with homework or helping the neighbors with their grocery buying for a tip. Once they have the payment in hand, motivate them to save a part of it and spend the rest. Remember, learning to spend is important too, do not urge them to save all they earn.

Talk about savings: Narrate age-appropriate stories about people who struggled because they didn’t save enough for a rainy day.  Let them know that you are saving for their education or new television. This will teach them to save for goals. If they wish to buy something new and do not have enough money in their piggy bank, offer to pay the deficit on the condition that they’d pay it back in installments. This will prepare them for the real world and also let them know how loans and installments feel. You can come up with similar ideas based on your child’s age.

Teach them to record money matters: Give them a diary where they can keep track of income, spendings, and savings. You can use this data later to explain how they overspent and thus cannot buy the video game they have been waiting for.

Let them accompany you to the bank: You can show your children how the bank functions and how people save their money to withdraw it later. Older children can also help with handing over documents, counting cash, using the ATM, etc.

Talk about charity: Make children aware of their privileges and talk about people who struggle for even the basic needs. Ask them if they can contribute to help them. This will instill the value of money in children and also make them empathetic and charitable.

Remember, we are raising financially wise children and not misers, so ensure that they are not going overboard with savings. Talk to them about balance. Also, let them make mistakes. It may tempt you to correct them before they make one, but they will learn only through practical exposure.

Happy Parenting!



Smriti is a freelance content writer and an avid reader. She quit her 6 year-long IT career to embrace her love for writing. She writes content across genres and takes pride in her ability to research and carve magic with words. She passionately writes about parenting and is currently working on her book. When not writing or reading, she can be seen running behind any of her 2 kids or learning Deutsch.

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