Smart Parenting : 5 unusual ways to help children think of money intelligently
In so many ways, children today are far smarter than the generations that came before them. In large part, this is due to the unprecedented level of exposure and technology they have access to.
But the flipside of this exposure is the cacophony of conflicting opinions, which can make it difficult for them to separate expert, educated voices from hacks with vested interest.
In such an environment, it becomes doubly important (and equally tough) for parents to ensure that their children are learning solid lessons that will hold them in the right stead for the future.
If you’re daunted by this thought, here are some tips that are far more engaging than boring lectures and basic concepts to help you impress on your children the importance of understanding money holistically and spending, saving, and investing it wisely from a young age.
Challenge, by imagining your future self
Difficulty level: Moderate to high
One of the most impactful ways to make money real for children of all ages is by asking them to visualise their grown-up selves, 10-15 years into the future. Then ask them to make a list of what it will take for them to become the person in their minds.
Next, ask them to do the research on the cost component for all the things they've listed down. And finally, how they would pay for it, if they were to do it on their own.
For example: Say an 11-year-old visualises herself as a cardiologist. To successfully complete this challenge, she would need to research the best pathways to study medicine, the cost of entrance exams, preparatory classes, tuition fees, rent and living expenses (if she chooses to leave home to study, as is often the case with niche education), books, etc. For older children, parents can increase the level of complexity within the challenge by asking them to factor in inflation, and also give them a budget: I will pay up to 'X' (either value or percentage) of the expense and ask them to come up with a viable plan for how they would cover the rest.
The point of this exercise is not to scare them, but to drive home the value of money, the effort it takes to earn it, and the importance of planning ahead and investing for major life goals.
Comparison shopping
Difficulty level: Low
In a world that constantly tries to lure impressionable minds towards making instant gratification a habit, it can be tough to teach children the virtue of patience when it comes to spending money.
This exercise can help. Ahead of an event - say, before a birthday - tell them you're going to buy them the thing they've been asking for, but only if they can beat or match the discounted price you've found for it somewhere.
Don't disclose the number you've found, instead put it in a sealed envelope.
As they undertake the research to compare prices across sources, you can discuss how discounts work and what goes into pricing a product a certain way.
For older children, you can increase the level of complexity by giving them a budget, so they might consider picking unbranded alternatives to more expensive choices.
You can even nudge them to buy it at a different time when brands tend to offer deeper discounts. This exercise will help them learn budgeting, variable pricing, saving, discounts, as well as how we often pay so much more for the same product just for the value of the brand name.
What's your financial bias?
Difficulty level: High
This one is a corollary to any simulation game you might play with your kids. Say, your child participated in several stock market simulations.
Now, together, analyse the decisions they made in how they chose to invest in a judgement-free manner. Ask them to explain what they pegged their choices on.
They (and you!) might be surprised to see clear patterns emerging even among kids. Behavioural economics tells us that our financial biases are most easily discernible in how we invest.
And that even children can show clear markers for risk or loss aversion, confirmation or familiarity bias, following the herd, etc. You can then have a deeper conversation with them about these biases and their potential impact.
This exercise will help children gain self-awareness early on and build stronger decision-making frameworks for the future.
You love sneakers, but what does it take to run a sneakers business?
Difficulty level: Moderate to high
Ask your kid to teach you how the thing they love most runs as a business. What are the aspects of owning and running a sports team? What are the factors one has to think of while running a sneakers business?
If you know someone who works in the industry, get them to speak to your child as part of their research. Since they're already in love with the subject, the research to understand the deep financial aspects that underpin the success or failure of the industry will not seem tedious.
To increase the level of complexity, you can ask them to consider cultural aspects. Eg: If the sneaker business is in a metro city, the mode of payment might largely be electronic. Will this affect the cost of the product? If it's in a smaller town, buyers might have a bias for cash.
Can this lead to losses due to theft or mismanagement?
This is a great way to get kids to start thinking in an entrepreneurial manner. Assure them that they don't need to have the answers, and that you just want them to start thinking beyond what comes most naturally to them!
Money lessons through the money club!
Difficulty level: Moderate
Given that money is a social construct, our financial actions are very heavily influenced by the actions of the people around us. Make a money club of 5-6 of your child's friends. Give them a group goal. Say, plan a vacation for a family of 4 for 5 days in X budget.
One might be willing to spend the biggest portion of the budget on travel so the vacation can be international, one might want to spend the most on experiences, a third might favour shopping, and a fourth might find luxury stay a non-negotiable.
To increase the level of complexity, you can even assign them roles - each person in the team is responsible for ensuring the best experience for a particular character within the family.
This exercise will help children build their patience and compromise muscle as competing priorities and individual goals must find a way to work together for a collective win.
The writer is Founder,FinCHAMPS
