The birds and the bees can wait; educate your children about budgets first.

By  Shilpa Nayak

Involving kids in purchase decisions is the best way to teach them rational spending

We'd like to begin this article with a caveat: parenting is complex enough without serious-minded business magazines like this one proffering advice that can most certainly be classified under the gratuitous category. Most people do a good job of it too, parenting that is, although their advice-proffering capabilities aren't insignificant. Most parents do a good job of instructing their wards on a variety of things that'll help them get through life: all about the birds and the bees; the taxonomy of forks; how to survive a crowded elevator; and the like. But when it comes to money, actually, teaching children the value of it, boy do they mess up. As a middle-path oriented publication, we've often shuddered at parents taking one of two extreme approaches. Thus, kids grow up to become penny-pinching wretches or licentious wastrels. What makes us qualified to tell you how to teach your kids the value of money? That's a legitimate question. When it comes to kids, Benjamin Spock we are not. But when it comes to money, we know our non-convertible debentures from our preference shares.

Look Within. If this nugget is reminiscent of a Zen-Buddhist instruction, forgive us. Children learn by imitating the people around them. Ergo, their attitude to money is probably a reflection of yours. If you are a moderate in terms of what you spend and what you save, they will probably turn out the same way. If you are an extremist, God help them. Being that, a moderate, is difficult these days: discretionary incomes are up, the debt culture is catching up, and the average propensity to spend has never been higher. ''Just because you have lots of money doesn't mean you blow it away,'' says Mona Sharma who hopes her grandchildren, Nikhil and Ayesha turn out all right. But if you are the kind who can't go for a walk in the neighbourhood without coming back laden with wholly unnecessary stuff from the supermarket, you can't blame your kids for not understanding the value of money. ''We never go out shopping unless we have to buy something; so the chances for the kids to just pick up dolls, colour pencils, and other things are slim,'' says Nimisha Bhobe, the mother of three daughters, Vinayita, 10, and Ameya and Anaya, 8. Nor does she waste money on a typical middle-class indulgence: dressing up the kids in matching accessories. ''No dressy bracelets for them,'' she stresses. Mom knows best.

It's never too early. Typical reactions to children's queries about money range from ''That's not your concern,'' to ''There's enough time for you to learn about such things later''. Actually, it's never too early. Children need to understand what money is (currency), where it comes from (work), and how it needs to be spent (necessities, fun, and savings). We're not suggesting a full-fledged presentation on how you can use Microsoft Money to manage your finances, but some amount of straight talk on the concept of money won't hurt.

All about earning, saving, investing, and yes, spending. Educating children about the origin of money-hard work, not the rich uncle-is one thing. Getting them to manage their own finances is an altogether different ball game. Some parents believe in the concept of allowances; others don't.

Getting your children used to the idea of a periodic inflow-a weekly or monthly allowance-isn't that bad an idea, but only if they maintain accounts of how the money is spent. If nothing else, this should help them build a fine sense of accounting-creativity that'll come in useful in their adult years, when they have to present expense and travel vouchers to the office.

Involving your kids in purchase decisions is the best way to teach them rational spending. ''When we bought a new car sometime back, the kids came with us to various dealers, and actually helped us do a lot of groundwork. All of us sat and decided which car was best for us,'' says Ikshita Asgekar, a Mumbai-based doctor and mother of two. It's actually quite easy to do this: if you're buying a house and taking a loan to do so, explain the details of the transaction to them; if you have a credit card, and these days, who doesn't, show them how it works (''There's no such thing as a free lunch'').

It isn't too difficult to get kids started on a saving-trip. The right time to do this is before they hit their teens. For sub-teens saving money can be a big high; for teens spending money is. Start with a piggy bank, then move on to a minor's account in a proper bank. And that will automatically lead them to the subject of investing. For they'll soon realise that while money saved in the piggy bank does not grow, that deposited in savings bank accounts does. As they grow older teach them about fixed deposits (not quite what Crosby, Stills, Nash and Young had in mind), and, if you're feeling particularly bitter with the world, Personal Provident Fund accounts. Teens may likely be carried away by get-rich-quick schemes, or be drawn to the stockmarket. Tell them a few horror stories of investors who lost their little-all in the bourses; still better, leave a magazine featuring such stories lying around.

Necessities and luxuries. Teaching children the difference between a necessity and a luxury is difficult, but once they understand the thin line separating need from desire, you do not have to worry about them ever again. Even if you can afford it, do not give into tantrums and lull children into the belief that they can have anything they want, as long as they make enough noise about it. Life doesn't work that way.
  

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