Last Updated on September 8, 2017 at 1:49 pm
A few years back, I took my entire M. Sc class to lunch. Don’t remember why. They probably coerced me into it! As someone who never eats outside, I was clueless about pricing and was trying to get a rough estimate as they wanted to go to a high-end place (relative to the campus cafeteria!). One of the students said, “Why worry sir! Just use your credit card. Swipe karo!” The student was no kid. He was about 22!
Is that how credit cards work?! You swipe and forget about it!? I ask because I don’t own one. Perhaps we should ask those who use credit cards for emergencies.
I think the need to get kids interested in money management cannot be overemphasised. Interested, not teach. You start teaching and they run away.
Here are a few thoughts on this subject. I am a father of a 4.5 year old. So let me not pretend to know much about parenting children above that age. That said, I am fairly convinced that the following would work.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
1) Let them touch and feel money at an early age. Let them see it change hands. Let us try not to use credit or debit cards in their presence because they should feel a sense of loss when a purchase is made.
2) Sooner or later they are going to want something or the other. Be it a fancy tablet, mobile, i-pod, whatever, if we can’t afford it, let us say a firm ‘no’.
If we can afford it, let us ask our kids to research on similar products available for at least a week. They would need to first make a short-list, compare features, watch product reviews on youtube, check out the manuals, discuss it with us and then decide. Obviously this applies to big ticket purchases only. One need not research over a bar of chocolate (although it won’t hurt to do so!).
It has to be their call, but an informed one. The benefits of insisting on this early in their lives will show up when they are ready to plan for taxes and make their first investments.
If we succeed in this regard, we can declare ourselves victorious for all practical purposes.
They will teach themselves the importance of not making impulsive buys, of research for product features, of reading fine print etc.
If it is a big-ticket or affordable purchase, we can ask them to wait a few months while we save for it. Start an RD or invest in a liquid fund etc. If the kid is interested, we can ask him/her to use a goal planner and figure out the amount needed. They will need to worry about interest rates. They can search for this as well. We can push as much as they are willing to take it.
Even in this day and age of online spending and investing, this little guy has a special place in instilling discipline.
3) I am not a big fan of paying kids money for doing chores or even giving them pocket money.
Participating in household chores is mandatory for all family members and one cannot put a price tag to it.
As regards pocket money, I don’t think it helps in anyway. I think it is a bad idea to give kids some , ‘do whatever you want money’.
4) Budgetting should be a family activity. It was until a couple of years back in my family. When my kid grows up a bit, I should restart that. Kids should see (hopefully observe; they usually do) how the monthly income is segregated into different compartments (expenses, investments and liabilities). Hopefully, they might ask a nice question like, “why do you invest?”. Perhaps we should also throw in some light jargon like, investing, saving, wants, needs etc to get them curious.
5) What about investing? There is no flaming hurry to teach about equity, stocks, PPF etc. I think it is enough if the parents discuss investments in their presence.
6) The importance of giving is more important than spending or investing. We will need to regularly engage them and ourselves in charity events, donate to organisations, volunteer if possible.
7) Transparency is key. Even if we make small purchases, my wife and I always tell each other about it. Not permission, just information. I think our children should also encouraged to do the same – to us until they start earning and to themselves and their spouses later on.
Update:
We have been teaching our child the need for money and how transactions works. He now understands that money is transacted in a shop in exchange for goods. He surprised us with his definition of a customer: “someone who has money”.
Here is a couple of videos that 15-year-olds might follow with a little bit of hand-holding (assuming one can get them to sit down and watch them for 43 and 30 minutes respectively)
William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour
How The Economic Machine Works by Ray Dalio
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)