We have always found ‘money’ a tricky subject for us to discuss with our daughter. From when she was as little as a year old – if she got hold of a currency note and was about to crumple it or tear it, we didn’t know what the “right” thing to say to her was. ‘Don’t crumple it because it is “important”‘ – is what we’d usually end up telling her (although we were always unsure of that statement).
Introducing the Concept of Money
We introduced the concept of money to our daughter when she was well over 3 years old. The introduction was a bit of a challenge for us because money always has capitalistic, consumeristic and materialistic connotations to it. Until then, we had been discussing with our daughter, concepts like sharing and giving without expecting anything in return. So now, how do we introduce the concept of money, the right way?
To begin with, we had to make money more tangible (that ‘important’ paper she shouldn’t crumple). We started giving her money to hold for an actual look and feel of coins and notes. For example, at a supermarket, we would ask her to hand over money at the cash counter for things we purchased. Conceptually, that helped her understand that ‘money’ was given in return for some things we took home. As she learned addition and subtraction at school, we would involve her in small transactions at the neighborhood store.
Even before our daughter could speak full sentences, she learned to point out things she wanted at a supermarket or in a mall (well, of course!). So at 4 years, she wanted to buy every glittery, shiny, colorful object she saw and laborious negotiations on why she can’t have all of those colorful objects followed.
We thought this was a great time to introduce one of the best tips in every parenting manual – ‘Needs and Wants’! It worked well initially – review an object with a ‘do you NEED it, or do you WANT it?’ question.
But after a while, that golden question stopped working its charm. She would say – ‘I know I don’t NEED it, but I really, really WANT it, please’. At this point, we introduced the fact that we have limited resources – there is a limited amount of money that families have every month and thus, we cannot buy everything we see at a mall. Our learning is that we should have introduced this concept much earlier when we began talking about money in the first place.
Concept of ‘Personal Funds’: Monthly Allowance
When our daughter turned 5, we decided to give her some more responsibility with her finances and introduced a monthly allowance. The idea was to empower her to spend it on whatever she would like to in that month.
Initially, we actually gave her the money (and a little purse she could keep it in). That did not work too well for us. She was so excited with the actual currency in her purse that she would pull it out to show it to her friends when they’d come home. That wasn’t really working towards our objective so we decided to switch to an ‘in- principle allowance’. She was given Rs 50 per month (for example) – and we paid from that allowance whenever she decided what she wanted to buy.
Facilitating Spending Decisions
In the first few months that we gave her an allowance, we did not influence her spending decision, we let her buy whatever she chose to.
It was interesting! The first month she bought an ice cream with fancy toppings. She was thrilled with her purchase at first, however, a week later she saw a set of watercolor pencils that she could have bought instead. She realized that buying consumables or perishables didn’t get her as much value for money – she’d rather spend it on something she could keep and use longer. With a few more purchases like these, she began having an opinion on what things were ‘worth’ spending her precious monthly allowance on. For example, it was decided that a really cool kiddie watch was totally worth it. Yet another box of fancy crayons, on the other hand, was not worth it since she already had so many. We believed that letting her stumble in her purchases was a good way to make her realize the value of money and discovering what money meant to her personally, irrespective of what we thought.
Once she ended up (unintentionally) carrying forward Rs 10 to the next month. She didn’t realize that she was ‘saving’. The next month, when she got the extra Rs. 10 in her allowance is when she realized the thrill of saving. This realization was far more impactful than when we tried getting her to save with a piggy bank.
Of course, like most other aspects of parenting, there’s no one formula – what worked for our daughter was perhaps different from what worked for some of her friends. Over the months, we realized that no amount of verbal conversations can explain concepts of money to our daughter as much as the actual experiences that she had with money first hand.