New year's eve with a new reflection: How can you be a good parent if you have never talked about money to your child?

-Dheerusha Tiwari

When was the last time you spoke to your children about finances? When I say finances, it simply does not imply giving and receiving pocket money. When did you and your child sat down to have a serious talk on spending, savings and investing? I am quite certain of one of your answers: “All these years, I have been working is for my children”. There is no doubt, as parents, you have undertaken every step to secure their future in one way or other. As a parent, you might have earned, invested, saved and spent less to provide them quality education. As a parent, you might have never said “NO” to your children. The biggest mistake any parents can do is probably not saying “NO” to their children!

In last 20 years of my life, I have learnt few things on how parents can play a significant role to make their children financially literate through my own experience and through my friends’. In the meanwhile, I share these lessons to you not as suggestions but as plans that we all can work on for the financial literacy of today’s or upcoming generation.

• Say “NO” to your children for a “YES” tomorrow:

Back when I was probably 5 years, I wanted those ice creams sold in cart near New Road. I cried, screamed and rolled on the foot path, embarrassing my parents just for an ice cream. I don’t remember my mother scolding me that day. However, I do remember, how she explained me we were saving for our next Dashain vacation so letting go one ice cream and preventing diseases that might come with it would get us our next vacation.

Any parents can teach finances to their children from ordinary life instances. As parents, if you say No to your children today, so that it will be a Yes for something bigger tomorrow, they learn to control their unnecessary expenses from that day onwards.

• Let them handle their Dashain Dakshina on their own:

I remember my parents handing over my younger sister’s Dashain Daksina to her. However, they always attached one condition with it. For upcoming one year, my parents would not fund any extra demands made by my sister. My sister was a school girl so; the only extra expenses she would make were eating chocolates or buying video games and dolls or at times even buying dresses. Next time, when my sister would demand something, my parents would in fact suggest “why don’t you use your own money?”  I could actually see that my sister ensured she spent right amount of money on chocolates and would discard any expensive video games over cheaper ones.

If as parents you are uncomfortable with providing all these festive seasons money to your children, you can at least split in half. They will be able to learn money management skills when they are given money when they are young. Handing over their money to themselves teaches the children the Dos and Donts of money from a smaller age. For instance, when parents keep their Dashain Dakshina with theselves, they are usually spent over education of their own children or probably savings that children never come to know of. However, if they are handed over with their money, they can make a financial decision to spend or save in their own.

• The rule of two piggy bags:

We usually have guests invited in our homes. Often, these guests are generous enough to either bring chocolates or give some money as they leave. At times, even grand ma or grand pa or our parents even provide us money. So, for such cases, we can teach our children to drop their money in two piggy bags turn by turn; each separated as Savings and Spending.

Here, children understand the importance of saving as they plan to spend their money. Parents should also let children to decide on their own as of which piggy bag would they want to drop in the money. This is when children will come across the concept of opportunity cost and financial decision making in a younger age. For instance, parents should not allow children to spend their money until they meet the target of saving’s piggy bag. This helps them understand to prioritize savings first as they spend money.

• The shopping pattern:

My mom and I usually go to shopping together. We usually shop on her way home from office. There are times I see that she cannot come up with a decision to either buy or not buy a cloth. She then leaves the shop with the hope that the cloth will be there even next day. The next day, there are times when she buys it and brings it back home. There are also times when she does not buy it the next day or any day.

I always wondered why she can’t come to a decision while shopping. As I grew up, I later realized this actually happens to be a strategy where you go back home and decide on whether you really need that item or not, whether you would have regretted that purchase and at times may be you would have got it in a better deal.

Well, I completely agree. At times, the result can be bizarre, if the item gets out of stock the other day. However, my mother’s shopping pattern has taught me to take responsible financial decision overtime. This rather implies our shopping behavior can also impact a child’s financial decision skills.  

• Ask your children the “how’s”:

When your child is no more a child and becomes a teen, their spending habit gradually changes. Usually, in their bachelors or high schools, they try to spend money on extra hangouts and excessive show offs. Now, this would not be a problem to every parents if they can afford their children’s excessive outings and show offs. However, if you decide to change it, the way you approach might not be the right one.

Back in my undergraduate or high school level, I was excessively attached with going to restaurants. I somehow realized my expenses were going out of my pocket money limit. So did my parents! In return, they adopted an approach of “How” instead of denying me the money or scolding me. They did not scold me for higher demands but they asked me one question every single time I made an unnecessary demand- “Do you ever think how we manage your pocket money?” As they repeatedly asked this question, there was one point when I actually focused on the “how” and sat down to calculate the extra expenses that I had been making. I tried to calculate the overall income, expenses and savings that my family could have.

I am writing this from a perspective of a teen- when parents keep us nagging for our extra expenses, there is no doubt we get irritated. However, instead of nagging, if we put forward certain questions, we do attain some realization that we are going in a wrong financial direction. The author of “Rich Dad vs. Poor Dad” make the same point that asking our sons/daughters “how, where, what, which and when” on money will help them evaluate their spending habits and they will look for a new source of income.

• A visit to a bank or stock market or insurance company:

 Eight to nine years ago, I still have a faint memory that the results of IPOs were available through SMS system. One was required to send message typing some kind of numbers and whether or not you were allotted with that IPO, the result could be seen through text messages. Usually, my parents asked me to send those messages to find out if we were allotted with shares or not. To be honest, I don’t really know if it was because they were not tech-people or probably because they wanted me to understand about investing.

However, this incident made me curious about IPOs. It would be wise to say, my interest on investment rose back when my parents talked about the next public issue, filled up those application forms, took leave to be in the IPO queue, discussed on allotted units and looked at share values in newspapers. 

In the same way, we take our children to amusement parks, zoos, restaurants and shopping. Often, we even withdraw cashes from ATMs in front of our children. It is equally important to take them to banks, stock brokers and insurance companies. Now that online trading, D-mat account has brought into practice, parents need to use this as an opportunity to create interest among children in investing from a smaller age.

• Speak to your children about “interest rates”:

Usually, parents try to hide about their debts to their children. In this scenario, children have a perception built “money in unlimited”. However, when parents talk about debts, loans and interest rates, children understand that there is a price to be paid for using someone else’s money or for being sort of money.

After graduation, youths end up with no idea on how to take their finances forward. Their will to live a luxurious life and the interest attached with loan often brings them a career panic. If these things are taught to children in their regular days during their childhood, they are at least aware about managing their debts.

• Making a choice:

Usually, parents can also help children make a choice in their first big purchase. For instance, when children demand for a laptop or a bike, parents can actually showcase a certain purchased shares. Parents can in fact ask children to either make their first big purchase or put their shares for the next bull. In the meanwhile, parents can also help them set inveting target which can help them make a bigger purchase. 

Finally, these seven lessons are not a guarantee on your child’s financial independence. However, they are something to be reflected upon. These lessons rather show how small ordinary activities can enhance financial literacy among children. As parents, we want to ensure everything is as per the demand of our children. As parents, we have always wanted to become the perfect parents. However, parents would never have a successful parenting if their children hated them so much for their NO during their childhood and loved them way more for the same NO as they grow up. Growing up in a middle class family, we all can relate concept of savings with how our mother makes us use toothpaste until its last drop. However, today as dynamics have changed, it is important, parents teach children about finances from several means other than the toothpaste.

It’s time to let your child spend in their way so that he/she can learn to save and invest in your way.