Disciplining a child is never easy. Children are more aware of everything and want to experience it all. Parents come with their own baggage of childhood experiences and want to give children far more than they got. Aspiration naturally makes every parent inclined towards meet his child's expectations. It is seen as an investment by modern parents. We genuinely believe that by providing the child all the experiences we can, we give them the right exposure. This approach is pervasive and with financial implications.
Parents tend to meet the child's expectations by compromising on other priorities. Money constraints are overlooked to meet the expectations of our child. This approach is fraught with consequences. From a child's perspective, there is every possibility of getting overwhelmed. The child can think that meeting all expectations is a parent's duty. By having all the expectations and needs met, the child may well be getting into a situation where he or she starts neglecting duties. The hobbies and aspirations turn obsessive, while duty and discipline may be rendered unimportant. This is where financial discipline can really change the way we raise children. And, there is a serious need to financially discipline children early on as this makes their overall character development easier. Here is a simple approach to teaching financial discipline to your child.
Start inculcating the value of money in a child as early as you can. Show them how to spend money sensibly. Talk to them about different ways of using money. Teach them how money is important for our livelihood, to create savings, in investing and for charity. Give them a balanced, complete picture well beyond just consumption and spending.
Engage with them when you feel they are showing wrong expectations. When children want something very expensive, tell them what they can get for the same value if they spent the money sensibly. When they demand things on impulse, make them think if they will really be interested in it after a while. Make them prioritize their needs.
Open a bank account for them early. Get them an investment account too. Show them how saving and investing works. Creating early awareness will make them sensible and selective about their wants. Once you show a child the right path, the child sticks to it. Teach them how good things come to those who wait for them.
The savings game
This really works. My dad used to manufacture those famous piggy banks for a public sector bank. So he would give us different models to fill with coins and low-denomination notes earned from doing domestic chores. My children use mutual funds as their piggy banks. Every time they reach ₹500, they start looking which fund is a good place. Setting duties, rewarding routines and creating savings work very well. Money received on birthdays and other occasions can also be invested with a purpose.
It is important to teach how to spend. Making them manage the weekly supermarket routine is a simple but great way to teach. Buying groceries regularly can teach a child everything about spending. Give your child a budget to shop and set some ground rules. By giving them choices with rules, they learn to spend responsibly. Incentivize them for spending smartly.
Financial discipline is actually easier to create in children than in adults. They are curious, enthusiastic and open to the concept. By making the learning process engaging, simple and easy, we can make them financially disciplined with minds of their own.
Parents must overcome their hesitation in opening up with children about money. Financial discipline is as much a priority for a child's development as their proficiency in arts and studies. By creating the right financial knowledge ecosystem to engage with a child, parents will give much more to their children than they received from their own. Importantly, children will know how they can lead a good life, the struggles they have to go through to sustain such a life, and that they need to be responsible to sustain such a life in the long term. That's learning for a lifetime.
Shyam Sekhar is chief ideator and founder, iThought