Money lessons for children: How parents can start
Impart budgeting lessons Balance power & privacy This is the time of the year when the best opportunities to teach young adults about money present
Impart budgeting lessons Balance power & privacy This is the time of the year when the best opportunities to teach young adults about money present themselves. They are celebrating their high school graduation with parties and presents; they are preparing to leave home to go to college and live by themselves; they are taking holidays with their family and friends to enjoy a few relaxed days of leisure before another round of hard work begins. What can parents do to help young adults learn money management during this phase?First, bring in the idea of budget, planning and allocation. In many households, budgeting and accounting for expenses has gone out of vogue. This creates an artificial construct as if money is an unlimited resource and is available on tap to meet any demand, especially those of the children. It is possible to keep a generous budget so that there is no sense of scarcity and control. However, young adults learn how to allocate money for various expenses and understand what they control only if they are given a budget for their parties, holidays and monthly expenses.Second, involve them in deciding the budget. Some parents take a firm stance, telling the child leaving for college that they will receive a fixed amount each month because that is what the family can comfortably afford. The child will fail to see the connect between their needs and the amount being provided. The opportunity to learn is lost, replaced instead by parental control. Others take the opposite approach, giving the child complete freedom to spend as they wish, only to step in with criticism after the money has been spent.
This ad hoc approach squanders a valuable opportunity to teach budgeting and financial responsibility. Sit down to discuss heads of expenses. Allow the child to negotiate for their preferences. Allow a buffer, but specify it. Don’t allocate and bifurcate to each head. That is a needless complication. Let them participate in the decision about their budgeted allowance.Third, even if you have picked up the bigger expenses and paid them directly, let it remain as a part of the budgeted amount. Do not artificially deflate how much it costs the household to fund this activity. The cost of air ticket, rent of the party venue, fees and hostel charges are all expenses attributable to the venture your child is undertaking. Simply making them aware of it is a good practice. There is no judgement or fingerpointing, but a mere statement of fact. Foster this transparency without playing hero or victim. Let the child be aware of all the elements of cost, irrespective of who pays it.Fourth, provide them the opportunity to make decisions about the budgeted money. If they want to fly a cheaper airline, backpack and live in hostels through their travel,allow them that choice. Do not come in with your money power to modify these choices. They have just begun adulting and they will not push their tolerance for discomfort higher. They will miss learning a precious life lesson. One of my friend’s children went with their friends on a train trip for three days on a budget of `500. The brilliant ideas they came up with during their travel and how they saw initial disappointment turn into a challenge and fun, will remain a story they will recall all their lives.Fifth, be available for counsel and advice, but wait for the children to ask for it.
The BriefWire