Talking to children about money responsibilities…..

 

I meet all kinds of kids – and it is worth seeing their attitude towards money and their parents. Of course their attitude is a function of what they have seen – and they have seen you. So if you are irresponsible, hey they too will be.

Some kids think that their parents owe them a living! Some kids hate spending their parent’s money – even a farthing! Some kids feel they should pay for their expenses, some kids are willing to pay if the parent asks them to pay. When I stayed with my parents my dad would withdraw from my account an amount that he thought fit. And knowing him, he would have withdrawn far far lesser than what he should have. He had the cheque book and my mother could sign it. That worked for us.

This is not about their attitude, it is about their ability to communicate with their parents about money. Recently I met one kid who has got admission in an institute where the total expenses are about Rs. 3 million for the whole course – it is a 2 year course.

This boy wanted to know the following:

1. Can my dad really afford this?

2. How much of an impact will it make on his retirement corpus? (father is in service, and will retire in 7 years time)

3. Should I repay this like a loan or is it a gift?

4. If I take a loan will I be able to repay it….and is that a good option?

5. How do I decide whether to do this course at all – personally I do not have so much money to invest/spend?

I was really surprised (actually sad) that this boy needed to ask me (a rank outsider) all these questions! His parents should be answering these questions…..well er…the kid should have already known these answers, right?

For example I knew my Dad’s salary, savings, investments….etc. right in my 12th class. At that stage I could influence his portfolio, now I fashion it!

Then I realised that not all parents are so open about their money arrangement. Not sure if it is a matter of wanting to be secretive or what – but it is nice to let the kids know what they can afford and what they cannot. I knew what my dad could afford – if I had got admission in IIT or MBBS he could have paid the fees without batting an eyelid. I am not sure if I would have asked him to pay capitation fee – but I am sure he could have afforded it. Like a typical Tam brahm family it would have been easy to find Rs. 100,000 (remember 1980 figures!) for an Ivy League education, but would have found it difficult to find Rs. 20 for a movie (LOL)…

Parents should either do a full disclosure or at least tell the kids:

– I have about Rs. 3 crores + a house, and a nice job.

– I will happily pay Rs. 30 L for your education as a gift and am willing to give you a Rs. 20L interest free loan in case you need it, but not a penny more.

– I am not too keen to sign a bank guarantee in excess of Rs. 20 L (instead of the int free loan mentioned above)

– Remember I need to do all this for your sister also :-) . Both my kids share my love equally, but education expenses will be on a NEED basis, subject to the same rules.

– I will pay your medical insurance, vehicle insurance, etc. till you are comfortable in your cash flow (once you start earning)

– If you earn anything up to Rs. 10k a month, it will be all yours – and you can fund all your fun activities…once you earn a sensible amount, I want you to repay the loans that you owe me (edu expenses above Rs. 30L)

– of course, once your salary exceeds Rs. 7 lakhs, I expect you to pay rent, pay for food, and pay for OUR vacations too :-)

Most of the kids I know would find this a very reasonable communication, but many parents will not do it. Too many parents do not want to cut the umbilical cord. They are worried that the children will go away from home and they would be rendered without any company.

So clear your mind, check your finances and communicate with your children…..

 

 

 

 

 

 

 

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6 Responses to “Talking to children about money responsibilities…..”

  1. Really nice article, i hope my father had read this 10y ago, even now in my late 20s and earning for the last 6 yrs, i have no idea how much my father earned/saved/invested etc. .. but i knew how much he spent on my education so as a responsible son i have been giving him arnd 25-30% of my salary almost every month, so i guess i have repaid everything 🙂 .. hate having any kind of debt 🙂

  2. it is umbilical ‘CORD’, not ‘chord’.

  3. Fantastic.. Nice info. Surely this will have a positive impact in the minds of the readers

  4. At age of 20 if a father speaks to child like he can’t understand it & may misunderstood it. But by 30 he will definitely understand it.

    When I am studying I asked my father a costly mobile & he got it for me. Now I am earning & think spending that much money on mobile (the same amount after 8 years 🙂 ) is waster of money 🙂

  5. Made me cry after reading this. My eyes were full of Tears.

  6. […] 2. You cannot afford that ‘asset’ : when you think of a geyser, car, or airconditioner remember the running expenses kill! It is not like buying a camera or a laptop, where there are no running costs…you get what I mean right?http://www.subramoney.com/2013/06/talking-to-children-about-money-responsibilities/ […]

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