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How NOT to Teach Your Children about Money (A Personal Experiment)

“Kavya, what is money?” I asked my eight-year old daughter recently, even as she was deeply engrossed in a book.

Her answer stumped me, simply because I was not expecting it and in the way she said it.

She said, “Papa, money is something that, if we don’t waste, can get us bigger and better things in the future.”

“Wow!” I told her. “You deserve a hug for this.”

How Kavya defined money may not be its perfect definition, but it effectively contains almost the entire essence of how we must handle it (money).

It contains the importance of saving money by spending less money now, and letting the power of compounding grow that money so that we can maintain our purchasing power (and still have more money) in the future.

I was especially amazed at her answer because the same child, till about two years back, thought that money came from the ATM, and that her father could get as much as she wanted to buy as many toys as she could set her eyes on. That’s what most kids think these days.

Anyways, since then, it hasn’t been an easy ride for me and my wife to get the right money ideas in her brain…but then who says parenting is easy?

My first-hand experience in parenting
I don’t remember how many times I have told Kavya to change her clothes after coming from school, brush her teeth twice a day, do her homework before going to play, and do anything else for that matter.

It starts with “Please do this!” and ends with “This is the fifth and last time I’m telling you to do this!”

I am sure if you are a parent, this is also a normal part of your daily life.

As parents, we ask, and ask, and ask, and ask…and if we are lucky, our kids cooperate after the fourth or fifth request or after a loud but otherwise harmless scolding.

We complain that our kids never listen to us, and ask other parents how they get their kids to behave, eat healthy food, and go to sleep on time.

If that’s not all, we consult the Internet and several books on bringing up well-cultured and disciplined children.

Then, even as we apply all those techniques, our kids just don’t listen. But, they do observe.

Yes, that’s the way kids listen to parents – not to their words, but to their actions.

While I am yelling at Kavya, she is watching me. While I am arguing with my wife, she is watching us.

While I speak out my mind at rash drivers or lose my patience during traffic jams, she is watching me.

While I spend money, she is watching me.

Our kids are watching our every move, even when they don’t listen to one word, at least not till we say it for the fifth time.

Our kids also watch our money behaviour
I have been a parent for just the past eight years, so whatever I am suggesting below is from my limited experience.

The truth I have realized is that, as parents, we shouldn’t worry that our children never listen to us.

Instead, we should worry that they are always watching us.

When it comes to money, I have realised that whatever little Kavya has learnt has been by watching me and my wife handle our money.

So I feel proud to know that, at a tender age of eight, she knows the importance of…

  • Spending less than earning (and now she is spending even less, seeing her parents spend even lesser as the family income has come down)
  • Not following the crowd (she is happy that her father owns a small car even as her friends’ fathers are moving to bigger ones)
  • Avoiding borrowing money (she is happy that Papa has no liabilities on his head and that’s why he will never have to go to work on a job to earn money to pay off any debt)
  • Giving (she reminded us that the annual sponsorship of two kids are coming up due, and is always willing to give away her possessions to anyone who cannot afford them)
  • Enjoying life instead of running after money (she wants Papa and Mummy to stay with her 24×7, even if that means lesser money to spend on dolls and dresses)

There are many more things that she will learn about money as she grows older (at least this is what I hope).

In fact, here is broad plan I am working on to teach her the several key ideas on money at different points in her life…

Cheatsheet: What I’m Teaching My Child about Money, and When

This plan is not etched in stone and may change as per changing times. But I plan to follow it like I plan to follow my stock investment philosophy with some discipline.

I hope this cheat-sheet also guides you in your effort to raise a financially responsible child.

The bottomline is…
As a parent, I have learnt that the only way we can design our children’s futures is by our own behavior.

So there is no point teaching them (or wanting them to learn) things we ourselves are not doing.

Telling them, “We should not waste money!” or “We should give money to the needy” will, in my experience, not lead them to do what we want them to do.

However, showing them how to not waste money and how to give to the needy will surely lead them to something good.

In short, keeping in mind that our children are not only watching us but learning from us should be reason enough for us to change our behavior before it is cast in stone for them and for their future generations.

I am just writing from my experience, however limited it may be.

The tribe would be happy to hear views from the more experienced parents and grandparents on how they have inculcated safe money habits in their children and grandchildren.

Experience is, after all, the best training manual.

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

Comments

  1. Jana Vembunarayanan says:

    Great one Vishal!
    In the 2013 Berkshire Annual meeting this is what Buffett said “Parents behavior impacts their kids more than the amount of inheritance they may receive from them.”

    Regards,
    Jana

  2. Another amazing post, Vishal!

    This is great insight for me, as I am a new mother – “As a parent, I have learnt that the only way we can design our children’s futures is by our own behavior.”

    I’m sure Kavya will grow up to become very smart with money, given what she is learning from your behaviour.

    Thanks again! Take care.

  3. Rajaram S says:

    You hit the nail on the head! Only one point, let the kid learn. Do not force it on them… Let the child create, and let us be there for them.We are a live demo of life to them, we do not need to use words to teach them…

  4. Raghu Raman says:

    Wonderful. Thank you for sharing this.

  5. Very nice Vishal! Thanks for sharing.
    My kid is seven month young, i always think of teaching him about perils of “seven sins” and charlie munger’s “psychology of human misjudgement” whenever he will start understanding things.

  6. karthik says:

    Vishal…
    An important lesson for Parents .. True…

  7. R.K.Chandrashekar says:

    Dear Vishal
    “Papa, money is something that, if we don’t waste, can get us bigger and better things in the future.” That says it all. Vishal, your daughter is a already showing that she is not just chip of the old block but the whole block!! The cheat sheet is literally a spoon feed for fellow tribesman to teach their children all about money. Alas, i have gone beyond that stage, and hopefully will use it to teach grandchildren in the years ahead!

  8. How does she deal with the peer pressure that she doesnt upgrade her car as often as her friends? I mean I recollect I would never do that in her place . Any tricks ?

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