Just over a month ago I read a story in UK’s Daily Mail that still has me reeling! It’s true; some parents can spend over $100,000 on a child’s birthday party. We all want the best for our children but extreme extravagance really pisses me off! Whether it is with children or adults it just rubs me the wrong way; in my opinion it is an expression of wastefulness and underlying selfishness. It doesn’t bother me when an adult chooses to live extravagantly but when children are exposed to such vulgar extravagance I really feel that the parent is doing them a great disservice because that is just not how the world is. It erodes the child’s ability to attach value to things that do not come with a price tag- like friendship and good manners for example. Everything then begins to have a monetary value and the corresponding monetary value seems to be what will determine general value as a person. Basically the value of your child as a friend to his peers is more often determined by what value they attach to the things he owns. For example the most popular kid in school will most probably be the kid who has the biggest birthday parties. In a bid to win the “popularity contest”, parents engage in an unhealthy competition, splashing out in excess on their children to make sure the child stays popular. I guess the real question here would be who needs financial literacy more – the child or the parent? According to a recent British study by Dr David Whitebread and Dr Sue Bingham from the University of Cambridge, the financial habits of parents have a direct effect on their children’s attitudes and behaviours regarding money. Children often mimic their parents, and if a child sees a parent wasting money or going into debt, they’re more likely to do the same as they grow up. A child who has never been shown how to save money simply won’t know how to do it once they begin to manage their own finances; they will attach no value to it. The same study on financial literacy finds that many of the habits that determine how we spend our money as adults are inculcated (or not) when we’re as young as seven years old. The study urges parents to go through various types of financial exercises with their children and exploit teaching moments when they can actually involve them in simple money matters. An allowance and some accountability for how the money is spent can be an effective teaching tool. When your kids are young, giving them small amounts of money helps them prepare for the day when the numbers will get bigger. The British researchers suggest teaching kids financial responsibility very early on in life, which, come to think of it, might help many adults as well – you learn as you teach. And the word is out that young workers who waltz into the job market expecting fat pay cheques may discover they’re lucky to land a job at all. Naturally, it’s no longer cool to spend everything you earn. So sensible spending is the way to go.
