How To Make Our Children “Money Smart”

By Rafiq Punjani

In my first article I shared my thoughts about how sometimes Parents go too far in parenting, at the expense of their own retirement planning. In this post, I am sharing some experiences and extending the subject.

Unlike west, where after a certain age children are on their own (they take student loans, study and work simultaneously, save for most of their wedding expenses etc), here in East parents pay for their higher education, extravagant weddings and even buy them a home! This social phenomena leaves most parents with almost no retirement savings.

Please don’t get me wrong – I am not against providing quality education or an improved lifestyle to our children, but there has to be a balance between parenting and planning for own retirement. I have seen parents, in love of their children, do every thing possible (from British education to iPads) to keep them happy. But this flowing and unconditional love of parents, some times give a wrong perception to their children, that parents have bottom less pockets – which in reality is not the case.

Recently, I visited my hometown in Pakistan to attend a wedding at a middle class family. During this wedding, I had the following conversation with a girl in her early twenties:

She said “Unlike this wedding which goes on only for 4 days, I will have a 10 days wedding with multiple functions, ending with a Grand Reception at a 5 star hotel”. Knowing that she is still a non earning university student, and will be getting married in a couple of years time (considering average wedding age in Pakistan) I asked her Who will pay for your Royal Wedding?” and as expected she said “My Parents, who else.”

Me being me, made her realise that it should be her to save for her own wedding, as her parents should now start saving for their own retirement – they are already too late.

She said “In that case, I will not spend my hard-earned money, on just a wedding – instead I will save it for my future”. Very Typical.

Instances like above, tells me that most children don’t understand the value of effort and pain their parents put in, to earn those dollars until they earn it themselves. Therefore, I always encourage participants at our Retirement Planning sessions to empower their children e.g.

  • Rather than giving daily pocket-money to your child, try giving weekly pocket-money. Develop a habit in them of having weekly budgets. This will make them learn, not to run out of cash before next cash inflow;
  • If they save anything from their weekly pocket-money, match their savings. This will make them learn to save more. Use their savings and your contribution in getting them, next item on their wish list;
  • Once they are in their teens, let them have a part-time job. Conducting a tuition class, or working part-time at on office , will not only give them few extra bucks but more importantly they will learn the pain and effort it takes to get those dollars home
  • Make them part of family financial discussions. Share your financial thoughts with them. As I mentioned in my earlier article, Children are way more smart than we think – they will definitely add a lot of value.

“If you want children to keep their feet on the ground, put some responsibility on their shoulders.” Abigail Van Buren

Making our children Money Smart will help them a long way in their lives and will also allow parents to save something for their retirement. If you are financially self-sufficient in your retirement, it will help your children too.

I need to emphasize again that Saving For Your Retirement should not be at the expense of your children’s quality education; but at the same time your child doesn’t need to go to the most expensive Nursery in the world, at the expense of your pension contribution. Keep a Balance!

A Well Wisher