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How To Prepare Your Child For Financial Independence

Monday, March 28, 2016
By Murad Nathani

Murad Nathani is Co Founder and CEO Slonkit

Indian parents are known for being extremely involved in their child’s life. It is an innate urge to ensure your child’s life is well-cushioned and that they never have to face any troubles. What we don’t realize is that this urge to over-protect will deny your child the experience required to become independent and it may also hinder one crucial aspect of growing up and functioning in the world as an adult, which is financial independence. So, it is important to be a responsible parent who takes care of children when they need it but also be the parent who is willing to take them out from under their wings and help them face the world.

Lead by example
The best way a child can learn about responsible financial freedom is to learn from the ones around. If you wait till the last minutes to pay bills, or don’t invest, your child will think and accept that this is how it is done. Ensure that you utilize a credit card judiciously and budget on a daily basis. Being a responsible adult will leave a lasting impression on your child. S/he will definitely pick up on your habits and adopt them when it is their time to become financially independent.

Start early
Our study of pocket money habits revealed that only X% of children between the ages of 10-13 get a fixed sum of pocket money each month. There is no harm in sitting your child down and teaching them how to budget. You should start with the basics and let your child ask as many questions. Start small with a weekly or monthly fixed allowance. Give them time to figure out how to work with money and eventually let them pick it up from there. Let them set monetary goals to buy an expensive toy. They can learn how to budget and create a pool of savings to purchase something costly. It will also teach them the value of expensive things and how much saving and budgeting is an important practice to be followed throughout life.

Provide controlled freedom
If you have chosen to allow controlled freedom when preparing your child for financial independence, it is essential to understand where you can play an easygoing parent and when a strict approach should come into play. Allow your child to make mistakes and learn from them, as long as you are keeping a close watch. During a study we conducted, several children and teenagers mentioned that they don’t appreciate it if their parents keep a constant check on how they are spending their money.  Let your child make decisions about where they would like to spend as long as you give your silent nod of approval. They should be able to manage their own expenses and decide how to prioritize their purchases. Your child should know that not all transactions should be dealt with like a risky investment.

In our study, 58% of parents are open to the concept of financial freedom, however, it is important not to create an environment where kids are too conscious to start managing their own money as you are constantly watching them over.

The Fine Line
An everyday struggle for parents is finding the right balance between being completely in control and giving them ample space and freedom. On one hand, the parent may feel that the child should not have go through any adverse situations. However, the struggle comes in when you want your child to learn and grow as an individual, which means making mistakes and learning from them. Our study revealed that most children do not have the opportunity to spend their own money since their parents almost always accompany them.  Even if you are accompanying your child to the mall or a park, let them buy their own food. They can even decide how much to spend depending on how hungry they are.

Parents should also acknowledge that fact that children today are far better exposed to latest technology and the internet, which is why they may seem to know what is good for them more than you would. This may lead to a few disagreements which may or may not end up in unfairly imposed rules, but parents should understand that these are the reasons which should prompt you to find the balance and give your child the controlled freedom which will only help them in the future.  Happy Parenting!

 

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