‘If I had known, I would have started investing earlier.’
Have you experienced this kind of language in your circles?
How do we decide, think about money, or, for that matter, anything? It all depends upon our experiences, past incidents, and our reference points. We are a continuum of our environment. Let me provide real examples to illustrate the point.
I met 22-year-old millennials for investment planning. He dabbled in stocks much earlier during college days. I asked him, “How did you learn?” The poised answer was I have seen my father investing. Viola! It’s not magic but a well-informed/imbibed approach to investing.
We also have a couple in their mid-40s who have been with us for the last 10 years. We often see them scrambling for funds; monthly investments are irregular, expenses exceed income, and no system seems to work. Surprisingly, their parents are in the same state. As they grew up, they took it as normal behaviour. These attitudes are difficult to change.
On this backdrop, how and what to talk to children about money? How can you create good reference points for them to grow up with? Like learning any good skill, such as swimming or playing a musical instrument, you cannot learn money skills overnight. The series of situations and experiences creates money memories, reference points, you can say. That guides our children throughout decision-making when they become adults. The following are a few key points to establish good financial reference points for your kids.
- Money impacts all aspects of our lives. Yet money remains the least discussed topic in families. It’s time to change that. Bring it mainstream. Discuss money in the drawing room and dining table. Let them know what it takes to earn, accumulate, and invest. (Parents’ clarity of basic personal finance is required?) Teach them where money comes from (not from an ATM), and they will know how to get it for themselves. Talk about your profession, services, industry, etc., and discuss office/work stories. If they know how one earns, they personify themselves as adults who earn for themselves.
- You can afford to buy, but that doesn’t mean you should buy anything: value-based spending is learned from small examples; discussing need and wants trade-offs helps your kid to spend wisely. When kids portray wants as needs, they justify their behaviour. Constant parental judgment is required to make one understand that wants are not needs.
- Tell the truth about your wealth. Let kids know whether you have sufficient money or a hand-to-mouth situation, or if you are in debt. Let your kids know it rather than receiving shocks and behaviour modification. If you don’t have funds and pretend they’re there, you are fostering financial denial. If you have good assets and you still don’t spend enough for a better living, you are creating frugal attitudes.
- It’s not your job to protect them from challenges: often, we see families talking or swearing by stuff like, ‘I don’t want kids to go through the pain I went through.’ Parents are so determined to provide a good life, in the process, we are creating entitled adults. Don’t protect; allow them to grow from their experiences. If they can’t cope, they won’t learn to cope.
- You can say ‘No’ or ‘Not Now’ for things that you don’t like. They learn the life skill of delayed gratification and avoid impulse buying. Ready for the storm when you say no, but by holding on, you are creating space for tolerating discomfort and building emotional resilience.
- When parents grow in scarcity and children are born in their abundant time, the question for parents is how to create values for kids so they respect and mold them in this requires constant sharing of money values, questioning decisions or their benchmark for few things (brand shopping is one example), and clarifying your few decisions to them so they develop specific reference points. Personally, I can vouch for my children—value for money can be taught.
We want to teach our kids basic financial fundamental principles and virtues to position them for success. We want to raise our kids to be mindful, hardworking, and grateful adults. Pass on the Financial Heritage, Model financial behaviour, and kids learn from it to become well-rounded adults who spend and save mindfully. Money is an attitudinal subject, and you are the key to developing those attitudes.
