When I was in my teens, my father always told me, "Son, don’t be a spend-thrift. Save whenever possible. It’ll help you when you grow old". Like most other teenagers, I didn’t pay too much heed then to those words of wisdom. But, with my hair showing enough tendencies of greying, my idea of savings and the value of doing so, changed dramatically. I do at times regret at not having taken my father’s advice very seriously early on in my life.
Interestingly, I have a nephew who is now 15 and comes across as someone very interested in savings and investment. It makes me wonder if things are actually changing on the ground. The ParentCircle-IMRB Nationwide Survey, 2015, just about reaffirms my thought. While 85% children said they spend a major portion of their pocket money on food and snacks, a significant 61% children showed inclination towards savings. A similar encouraging trend was also seen in books and magazines with a good 51% children wanting to spend some part of their pocket money on them.
Interestingly, gadgets and phone recharges, which are seen as ‘serial offenders’ by many parents, didn’t figure high on the list of pocket-money spends by children. Only 2% children said they spent on phone recharges. With the introduction of family plans by many mobile operators, the numbers actually do not surprise.
Bharat G, a telecom analyst from Hyderabad, says, “Over the last year or so, many mobile operators have started family schemes where call and data plans are shared. This is not just about customisation, but also about targeting the youngest members of the family. In simple words, the head of the family actually ends up paying for the youngest members too. So, you know why children are not spending a whole lot on recharges.”
Given the drop in direct expenses, children become more inclined towards savings. These savings are then used for purchasing a bigger product, which erstwhile was out of reach. The survey also indicates that children understand better, the concept of money management these days.
Murali V, a chartered financial analyst from Hyderabad, says, “Children, especially teenagers, these days are very smart. They understand money management better than many adults do. They are well exposed to the costs involved in many aspects of life. There has also been an increased awareness, thanks to big ad spends on financial plans, especially SIPs (Systematic Investment Plans) by NBFCs and banks.”
Big jump in pocket money aiding savings?
But, how much of the inclination towards savings has to do with the overall increase in the quantum of pocket money itself? The ParentCircle-IMRB Nationwide Survey, 2015, shows that the average pocket money received by a child in the age group of 10-18 years is ` 774 per month. Children living in the city of Guwahati receive a whopping Rs 2380 per month.
Murali adds, “When you have more money at your disposal, you are better placed to distinguish between needs and wants. The same holds for pocket money.”
Children often hear the term ‘hard-earned money’ from parents, but they will not actually understand the meaning of it till they actually see value in every aspect of life.
Vasundhara Kumari, a parent from Bangalore, says, “My husband and I are well-placed financially and have made all the arrangements for our son’s higher education. Yet, we make it a point that he realises the hard work that goes into earning money and saving. This has, in turn, made him a responsible teenager who is inclined towards saving than spending.”
All about needs versus wants
A study titled ‘Saving in childhood and adolescence: Insights from developmental psychology’, conducted by Centre for Social Development, Washington University, explains several correlations:
“Children’s and adolescents’ ability and willingness to save do not only develop as a result of social learning (i.e., observation of role models) and direct teaching (such as explanations and guidance with regard to the spending and saving of pocket money or allowances). Rather, skills and attitudes related to saving are indirectly related to parenting behaviours that lead to higher self-efficacy beliefs, better self-regulation strategies, and more independent economic behaviour in general.”
Maitreyi Surendra, a child psychologist from Bengaluru says, “The Katona theory of saving, which came into play in 1975 holds very good even today. Katona had then said that saving is nothing but a multiplication of ability and willingness. Today, there are families that run into trouble because of flawed future orientation. They go on a spending spree without even bothering about saving for their contractual, discretionary and residual needs. The same habit trickles down to the next generation. Having said that, I am very glad to note that saving habits among children is on the rise. It lays the foundation for a great future in every respect.”
At appropriate ages, parents would do well to talk to children about the status of the family’s financials. But, while doing so, exercise caution since you do not put undue stress on your child. There is a very thin line between imbibing a sense of responsibility and actually stressing them. It is always said that savings begins at home and with the little things in life. So, help your child save now. Catch them young for a better future.
- Lead by example: As parents, if you are inclined to save more than you spend, you are setting an example. Clearly distinguish between comfort and luxury for yourself, and your child would follow suit.
- Piggy bank: Gift your child a piggy bank early in life. Piggy banks start off as fun toys, but can gradually help your child understand the idea of savings.
- Match your child’s savings: If your child saves X amount in her piggy bank this month, you should match it. This will encourage your child to save more.
- Needs versus wants: Involve your child in broad family budgeting for the month. Let him understand what goes into running a house on a monthly basis. This will also help him understand money management skills early in life.