By Dhara Thakar Meghani
Who taught you about money, and how did you eventually learn to value it?
If you have trouble recalling the precise moment (or are in the group of parents who believe you’re still figuring it out), rest easy; it is hard to pinpoint because it’s a process, and will be one for your children, too.
Financial literacy, or understanding about managing money, is an important ability parents can start honing in their children quite early.
Children’s understanding of the way money works progresses in multiple stages over several years.¹ As early as age three, children are aware that goods cost money. Because they don’t yet have an understanding of basic math, they won’t be able to recognize that some things cost more money that others, or that you can’t buy something if you don’t have enough money, ideas that are clearer around age six or seven.
By middle childhood, a child certainly knows that money is important, symbolic of status, and emotionally laden. All children, regardless of age, are constantly picking up what they know about money from watching their parents’ spending behavior and hearing them talk about their finances.
What does all this developmental information mean for parents? Make it a point to talk to your children about money in age-appropriate language soon, if you haven’t already started.
Being pro-active about this topic is essential in this generation in which money exchanges hands much less literally than ever before. Children rarely witness those ancient parental activities – trips to the bank, paying for groceries with cash, writing and mailing checks for bills – that communicated valuable ideas that money is earned and can be saved, and that there can be negative consequences for spending too much money or not paying bills on time.
When packages magically appear at the doorstep or books and music are instantly downloaded on your child’s iPad because they were purchased with plastic as opposed to a face-to-face transaction, the fact that money is valuable and limited becomes abstract for children (and honestly, for you too).
Confronting the money discussion may feel new to you if you came from a family where money matters were not discussed openly with children, where children were never allowed to have and spend their own money, or where managing money was by default the man’s responsibility – which is often the story in many traditional South Asian households.
You may also see things differently than your parents’ generation or an earlier generation of South Asian immigrants who encountered the struggles of starting anew in a different country. For example, while frugality and saving money were the main priorities for that generation, additional financial flexibility in your and your children’s generation may bring spending for pleasure, investment opportunities and philanthropy into the financial literacy discussion.
So if you’re ready to dive in, remember this: Lectures about valuing money and exercising financial restraint are just not enough. Hands-on experiences in which your child has some control over managing his own money are much more powerful teachers.
Here are a few strategies parents have tried:
1. Provide a flat monthly allowance that gradually increases over time (based on what you think is appropriate) and sit down with your child to help him create a monthly budget. Suggesting broad categories such as “giving, investing, and spending” can encourage children to think about the different ways their money can be spent from the start.
Stay firm if your child goes over budget (or work out a loan system where she can borrow from you) and help her identify how she can plan a bit more wisely in future months.
2. Decide whether you will allow children to “make money” by doing household chores or to reward exceptional behavior – this concept is generally practiced much more among cultures with Western origins² and does not always make sense to parents who expect children to participate in these tasks and be well behaved without a monetary incentive.
3. Check out websites that promote children’s financial literacy and give them opportunities to practice what they learn. Pktmny allows children between the ages of 8-16 to use an online spending account that is created and closely monitored by their parents. It also makes communication between parents and children a little less daunting and hopefully, more fun!
There’s not a generation that goes by that doesn’t lament the “careless” spending culture of its youth. Don’t let this truth prevent you from being the one your child thinks of fondly when he’s asked the question, “how did you learn the value of money?”
Dhara Thakar Meghani invites you to share tried and true strategies you’ve used to teach your children about money matters!
Notes:
¹Berti, A.E., & Bombi, A.S. (1981). The development of the concept of money and its value: A longitudinal study. Child Development, 52, 1179-1182.
²Bowes, J.M., Flanagan, C., & Taylor, A.J. (2001) Adolescents’ ideas about individual and social responsibility in relation to children’s household work: Some international comparisons. International Journal of Behavioral Development, 25(1), 60-68.
Image from Azimo
