The Most Important Money Lesson for Your Kids

 

A big part of being Dad So Kool, is raising Kids who know & clearly understand the rules of Money & How Money works in the real world. This will enable them to be more confident about managing their Money and Building Wealth ,thus living in abundance which in turn will result in living a fulfilling and comfortable , happy life.  Isn’t that what we all want for our Kids? A peaceful & happy life where they don’t have to worry about “Money”.

 

To ensure they learn how to Manage Money  , I will be covering a lot of ideas in the times to come..however the most important of all that I’d like to highlight in this post is:

Touch & Feel of Money Flow

Right now, We live in an age where we ourselves as adults , rarely , literally “See” the Money that we earn & spend. It’s all just numbers on screens and apps. With payment options like Credit Cards, Debit Cards, Net Banking, E-wallets, etc. there’s hardly any real hard cash with which we transact these days.

However, We’ve ( Gen X & Y for sure & a large percentage of Millennials as well) grown up for the most part of our lives,  dealing in hard cash. We’ve grown up seeing our Parents & Grandparents pay Cash for Goods & Services. We’ve ourselves grown up paying cash for everything , until a decade or two back when plastic money & online banking became popular and acceptable as safe modes of transactions.

Hence, while we resort to digital transactions, we understand the Flow of Money… Where it comes from , where & how it goes towards… for what purpose. Today you’re behind the curve if you aren’t comfortable with online transactions, Payment Apps, Net Banking , Credit Cards , Debit cards , E-wallets & online Bill payments etc.

Infact, If you’re a Financial tech savvy person , there are chances your physical wallet will perpetually have embarrassingly low amounts of cash . And of course only at such times, someone will always ask you for change or a petty amount to pay for the cab/quick bite & you’ll open your wallet and show them how you really don’t have the cash …thus making you look Cheap & leaving you feeling embarrassed . Holds true for me… I resist going to the ATM…It’s such a pain visiting the ATM… that annoying Key pad tone…puk puk puk puk puk …… puk puk puk puk.. then the JJJShhhhhhhhhhhhhh cash sound … I’d rather just swipe my card and move on. It’s not just the visit to the ATM, but I simply find it much more convenient to use my Debit card / Credit Card for payment wherever possible. This also helps me keep a track of my budget & expenses.

While I go around conveniently using Netbanking, Paytm, ATMs , Plastic Money etc, I know I have to pay the CC Bill from my Bank Account which keeps my hard earned Money. If I swipe my Debit card , the amount gets deducted from my Bank Account… If I take out Money form the ATM, my Account Balance reduces. Of course I save the environment by not taking the Paper slip, despite the ATM not really caring about it by keeping 3 ACs running for itself! 😀 ..We understand how all this works ..

But…

NOW HERE’S WHAT OUR CHILDREN SEE & UNDERSTAND HOW MONEY WORKS: 

Because our children have never dealt in Hard Cash or not seen us dealing frequently in Cash, for them, perceiving “Money” as paper currency or something tangible  is a difficult Idea.

For our Children Money then literally becomes an Abstract Idea that is unlimited & never ending..because here’s what they see as a chain of events in a few situations:

  1. You got down & went to the Super Market. You bought a ton of Groceries . You also bought Biscuits, Cookies & Chocolate for your kid demanded for. You then stood in a random line with a machine at the other end… when you reached the machine , You took out some plastic thingy from your wallet , Swiped it, put in some numbers and the Cashier smiled at You and gave You everything you had in the Cart. As a small Kid & an observer all this seems Amazzingly easy and convenient … Daddy just takes out some card from his wallet, Swipes it & we can walk out with anything we want. Your kids don’t see the CC Bill payment you make at the end of the month or the SMS Alert You got after swiping the card stating what your Account Balance Now is. They feel this Card is a Magical unlimited source of something that allows you to take home whatever you want.
  2. You go to the ATM with your kid. You swipe the card to take out some cash. There’s no discussion on Account Balance etc. You simply punch in the Money required , take it & get out and spend it on whatever it is that you intended to. You kid does not see the SMS alert of reduction of balance on taking out the Money… Or the fact that your heartbeat just got a bit faster while withdrawing the Money because you were already running a bit low on Account Balance that month. Magic  again!!
  3. You’re at the Dinner table & Your wife asked you to order Groceries/ Clothes/Anything. You agree & fiddle on your phone for 5-10 minutes post Dinner. And next day , evening , your kid sees the Groceries/Clothes/Whatever you ordered lying on the Sofa in the living Room. Awesome!! He/She wonders.. Dad can get anything he wants, the very next day, by doing something magical on his Mobile Phone.

Point being..as your kid sees all this happening on day to day basis, She does not see the role of Money in the transaction. She does not see that there is an exchange of Money taking place in return for those Goods & Services. She does not see that this money exists in your Bank Account and how your Bank account is linked to the ATM machine and Your Debit card/Credit card etc. Your kid does not see the very Foundation (Money) on which Netbanking, Cards, E-wallets & ATMs are built upon.

Since we’ve grown up dealing in cash, we understand that Money is a currency which is a medium of exchange and is finitely ( the sum may be large or small but is well defined & finite always) available in a wallet/Bank account at any given point in time and this Balance in Wallet/Bank account reduces as you spend the Money.

However in today’s Digital age , Your kid perceives Money as an abstract idea or something that resides in a Mobile Phone or a PLastic Card in Mom’s/Dad’s wallet or in some big machine in a fancy Air-conditioned room & is infinite & always readily available in whatever quantum needed anytime, anywhere.

This illusion distorts their view & understanding of how Money works in the real world.

Hence to give your kids a more real world feel & understanding of how money works , you can try to follow these steps whenever possible: 

  1. Let them frequently experience holding a specified amount of Cash/ Currency in their hands & transact using the same to buy small ticket items at a local convenience store. Let them experience having a 100 rupee note and buying fruits worth 50 & getting 50 back from the Cashier
  2. Talk to them about how You make Money . How You get limited Money in return for the Business You manage or the Job that you do.
  3. Talk to them about how and where Your money is kept ..in a Bank to keep it safe and how Your Bank Account is connected to the ATMs & E-wallets & Debit Cards
  4. Talk to them on how Banks , ATMs & Credit Cards work.
  5. Talk to them about how you allocate your spending towards Groceries, Petrol , entertainment etc.
  6. When going to the Super market , don’t buy everything they demand. Instead give them a certain amount of Money and tell them that it is now for them to independently decide and figure out what all they want to buy for themselves in that amount. Say you give them 200 rupees. Let them decide if they want to buy a single fancy Toy worth 200 or buy biscuits for 100 ,a toy worth 50 and a Book worth 50… whatever they wish. This will teach them that Money is Finite & it needs to be spent as per their Priority and requirement at that point in time.
  7. As your kids grow up, Talk to them and teach them the concept of Needs & Wants, value of Saving..investing ..delayed gratification , Assets Liabilities etc… while these are complex ideas but you’ll be amazed at how early & how easily they grasp these…More on these in a detailed blog post.

Most importantly, let them hold cash in their own hands, transact with it in exchange for goods & see the money getting exhausted as they buy the things they want. This will easily make them understand how Money works & how to purchase by prioritizing what’s important & what’s not.

The above steps will go a long way in making your kids AWARE of how Money works in this Digital but Real World.

If you found this post helpful, share it with other Parents as well !!

That’s all for Now…
See You around.

Cheers!
Bhushan
Dad So Kool.
Fearless, Committed, Evolved & Involved.

2 thoughts on “The Most Important Money Lesson for Your Kids”

  1. Dear Bhushan, I agree with most of the things you mentioned.
    In my opinion, the most important thing, we, parents need to do, is talking! Talk and talk and talk. Explain them the true situation, and how we strive to even provide.
    Nice article. Keep it up

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