India is this hub of melting cultures and varied communities, but a thread of commonality that encompasses all these differences is our approach to money and children.
By Lavika Aggarwal, Co-founder, akudo
Every culture has a unique relationship with money. Other than collective conditioning, individual experiences, whether socio-economic, psychological, historical, or familial, affect how you view personal finance. India is this hub of melting cultures and varied communities, but a thread of commonality that encompasses all these differences is our approach to money and children.
We’ve always hushed any conversation of finances around children or teens. It is not part of our culture to involve children in financial discussions of the household. A tabooed subject often left to the recluse of the parents or guardians. But slowly, as teens have access to free internet, they are exposed to new concepts, ideas, and an overload of information lost between facts and Ponzi schemes. The result is ill-informed teens growing up to make imprudent financial decisions as adults.
It is also understandable why it could be difficult for an Indian parent to indulge in such conversations. They might have apprehensions about the negative effects of money on a child’s development. To be exposed to the ills of materialism at a young age (according to society, money is the root of evil) is a constraint, coupled with the worry of overwhelming the child with unwanted information and unwarranted economic stressors.
Well, the upsides of discussing personal finance with your kids are far more than waiting on banks to teach your 27-year-old son about mortgages, tax benefits, and loan interests.
Listing below a few ways to spark interest and positive conversations around personal finance with your children.
Begin with differentiating between needs V/S wants
The first step to keeping any apprehensions in check around the negative effect of talking shop with your teen is to talk about needs and wants. When the child understands that desire is the only driving force behind their decision, it is time to re-valuate and reconsider. Critical thinking is key here, the ability to objectively analyse a situation and develop a suitable solution for a problem. It is crucial you lay down the consequences and suggest alternatives that are likely to be as desirable if not more.
Money has always been colourful with no gender
There is a never-ending loop of discussions at new-age fintech firms on how and why women form such a small part of their customer pool. It doesn’t take much to tie this back to our socio-cultural roots. Women in India have less financial access than men, drastically reduced spending capabilities, are less exposed to money management matters, and are repeatedly left out from financial decisions. It is not easy to resolve this gendered view of money, but one can start early by financially educating and empowering children irrespective of gender. Mothers have run entire households on “Ghar kharch” and then saved some; we indeed underestimate our girls and their power to process and re-engineer.
The rule of rewards and incentives
This might sound right out of an American family sitcom, but there is a lot of truth to it. Positive consequences often encourage behaviour change in children and teens. Rewarding your child for saving a little from their pocket money or using it for a good cause rather than just candy will reinforce a stronger belief system.
The 50-30-20 rule
This one’s for the older teens; the younger ones might get dazed by the numbers. The 50-30-20 rule is to live by whether your child has an independent income or is reliable on you for it. The rule of budgeting is elementary. The income should be divided into 3 parts, with 50 per cent of it going towards your needs, 30 per cent towards your wants and wishes, and 20 per cent straight into savings. This thumb rule for budgeting has helped so many households in times of need when taught from a younger age is sure to make your child more financially prudent.
Leverage new-age fintechs and their services
While you can start with good old savings accounts for teens at a traditional bank, there are so many start-ups that have come up with customised prepaid cards and banking for teens. When there is tech to help your child learn the basics of personal finance and money management, it is wise to use these tools to your advantage. To not only create responsible teens but financially responsible adults for the future.
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