I’m not going to lie to you – being wealthy is a lot of fun. And I’m not just talking about novelty fun that you get from driving around in a fancy car. True wealth is more of a big picture thing – freedom from negative stress and a higher confidence about how great life is. Let me tell you what I’m teaching my Kid about Money.
I want to pass this gift along to my daughter if at all possible because it is truly a great way to live. If my girl eventually ends up as happy with his lot in life as his parents are, we will be more than satisfied.
In India where most people’s best attempts at “getting ahead” are in fact recipes for financial disaster. With the so-called improve lifestyle, problems and stress have also increased. Parents are trying to catch up to ensure that their children are not left behind. It’s a kind of a race since from the birth child have to participate.
I was thinking how much things have changed since I was a kid. What does one do once the opposite kid has nicer stuff than your kid or the other way around? How do you say no to your kids when they want things that you can’t afford for them? How do you handle allowances, jobs, paying for education, mobile phones, cars, and giving to others?
All of these perceived social pressures for being ahead or catching up with others. It was two decades ago life was much simpler and joyful. If we followed a much simpler model of family finance back then a lot of pressure and stress can be avoided. It seems that if we bring those values, life gets a lot simpler for kids.
Money is open subject
Money topic should be open to the family without any discrimination of gender or age. Even a toddler should know exactly how money is earned, what happens when you spend it (it’s gone), and what happens if you invest it instead (it works for you, for life). So whenever she has been old enough to use the money by her self, I will try to give her a chance to learn for herself how it works.
Being a child is kind of a remunerative proposition currently. She gets occasional money gifts from relatives and a pay from ME in style of coins I provide her. By this age (she is 4 years) she knows what is money and she can get anything in exchange for it. I used to give her a chocolate in exchange for a coin so she knows that the coin has some exchange value. She now asked for coins from me every now and then. She makes sure that coins are increasing day by day.
Over the coming years, when she has grown up, I’m expecting her to move from these little-kid sources of income into more independent ones by a way of doing what she likes.
Some parents like to focus on academics: “Until you graduate, getting good grades is your only job.” But I like to think of a good education is not only academic education. The school is important for a child for learning and grooming, but tell me how many of that complex math formula do you remember or use? The basics of money is not taught in any of the school at any level. That’s the reason many people are dumb when you talk about personal finance and wealth creation.
Your kid should know that money is not infinite. He/she should value it and understand where and how to use it. Make them understand the whole cycle of money. Try to cultivate habits of expense recording and review in your kid.
Higher education, performance, and stress
This is the real test for me. A pressure of performance arises when high achieving parents assume their kids needs to push to achieve more themselves to beat out the others and gain access to the most elite school/college in order to compete for the most incredibly challenging modern world. To me, raising a kid to feel pressure and fear so that they can be competitors is a bullshit. It may be that most parents are still operating from a scarcity mindset. They will assume that their children will need to earn and consume just as much in order to get the top slot of the economy.
What I am teaching my kid about money
All of this kid stuff is just the groundwork for the bigger (and slightly radical) perspective on money that I want to instill over her lifetime: that money is something you can master and control, rather than letting it control you.
Observe the following statements and see if you agree with them. While you can poke holes and find exceptions to each one, the overall philosophy is remarkably true if applied forcefully over a lifetime:
- Income is not something that employers or the government ration out to you based on a rigged system. It a something you generate yourself. It is the byproduct of your hard work, combined with learning and mastering the system itself. Even the system itself is subject to your control if you choose.
- “Expenses”, “Needs”, and “Cost of Living” are terms that come from a mindset of weakness. Instead, use the words, “My Spending”, and realize it is in your control. By making the right moves and the right arrangements with other people, you could theoretically live for free.
- Money is not everything but so many thing. While it is currently a major barrier to most people, it is easy to master it early in your life. Then you move on to the real challenges: finding out what life is really about.