5 Rules Every Child Should Know About Money

Money. It makes the world go round. But, for all its importance, our schools and colleges hardly cover it as a part of the core curriculum taught to our young ones. As a parent, I decided to fill that gap…

(I wrote this for my own two children, attempting to put down all that I have learned in more than two decades of studying Personal Finance. Feel free to share it with your folks, if you find it helpful…)

The Context

Money is important. Some folks prefer not to talk about it, while others seem to go on and on about it. Some will hide their wealth from others, while others will generously give to a stranger. Some will not have enough to afford the day’s meal, while others will have more than what is needed for ten lifetimes! It takes all kinds, and you will need to figure out where your equilibrium lies.

My advice would be to avoid extremes, and find some middle ground – it will make more sense to you as you grow older (and wiser). Don’t try too hard to get this part right. Focus on the rules that come next.

And remember, much of this will not make you popular among your friends and colleagues. In fact, you will find yourself in the minority. But, stay on the path, and you will live a full Life…

Rule #1 – Spend Less Than You Earn

Whatever Life you choose for yourself (yes, even if you decide to live “off grid”!), you are going to need some money to survive. If you’re not careful, you will find that you have more month left at the end of the salary (or any other source of income) than you would like.

There is a simple and effective way to remedy that situation – Spend less than you earn. Few have the discipline to follow this advice. The biggest obstacle in its path is our impulse to “own” every shiny, new object we desire in a moment. Do this often enough, and you can say goodbye to any real savings you hope to accumulate in your early years.

The antidote? Spend some time thinking about the impulse purchases that tend to rack up, and eliminate those to start with. It helps to delay the purchase for a week and assess if you still want it. (Often, you will find that the feeling has passed!)

An invaluable tip to decide what to really spend on, is to think of it in terms of the time you spend using it. Don’t scrimp on the stuff that matters, like a comfortable bed, or an ergonomic workstation. The more time you spend using something, the more you can justify the spends needed to get it done right.

Rule #2 – Focus On The Big Rocks

Remember that story about putting the big rocks in the bucket first, so you can fill in the smaller ones later?

Once you’ve managed to curb those needless, impulse purchases, focus on the biggest recurring expenses you have, and apply the 80-20 Pareto rule. You will find that two or three major heads contribute the most to your spends – Review and redo them for maximum impact.

You will need to figure out which trade-offs are acceptable to you and your family. For example, your rent or EMI payments may figure among the top three expense items – Can you afford to shift to a smaller place or find a house further away to reduce this cost head?

Making changes will not be easy or without inconvenience. But, if you are constantly playing catch-up with your income/expenses, the rewards will be worth the effort.

Once you make a real dent in your “big rocks”, you should find yourself in a comfortable position to start accumulating some savings each month. Aim to save at least 10% (each month) in your first year, 20% next year, and so on, until you hit 40-50% in the first 4-5 years. You can tweak this later as your lifestage and priorities change.

Rule #3 – Understand Rent vs Buy

You’re part of the new millennium, and fortunate enough to be born in a world with possibilities. Don’t take advice from old foggies who lived in a different time. Be open minded to the new world order.

There is absolutely no need to Buy something (even if you plan to use it again and again), if there is a Rent option available that makes more economic sense.

Take the example of Music – my generation grew up on cassette tapes and CDs, and your’s on streaming music and the Internet. Buying the album you want will mean locking yourself into a format (that may not last your lifetime – think laser discs!), storing it (will you have enough space?), and accessing it with physical constraints (will it play on all your devices? on demand?). Buying a subscription to a streaming service, on the other hand, frees you up from all of those limitations.

In your lifetime, I predict you will be able to Rent/Lease stuff that we could never dream of – hugs, time spent with dogs awaiting adoption, the experience of growing an orchard. Choose “Rent”, whenever it makes more sense to do so.

Rule #4 – Safeguard Against “Risk”

Before you begin making investments, you must learn about the concept of Risk – in Life and with regard to your money.

Understand how “Insurance” works, and begin by buying the most-inexpensive term cover you can buy, for a cover that is at least 10-20x of your annual earnings. Then, get adequate medical coverage to protect against health-related contingencies. You can always add to this basket, as you learn more about your priorities and what’s right for you.

Once you’ve got adequate cover, understand what puts your investments at risk (inflation? unoptimized tax structures? taking on debt? lending your money to folks who will not be able to repay you?), and how to safeguard against them. Knowledge is the key, here. The more you understand Risk, the better equipped you will be to deal with its consequences.

Rule #5 – Learn To Invest

Savings will not keep up with Inflation. So, you must learn to invest. No, don’t rely on the so-called “professional experts” for the basics – their incentives are not aligned to your objectives. In matters of Health and Wealth, you must have the foundation knowledge necessary to get the essentials right. After all, it is your life. No one will care about it as much as you do.

Learn about the concept of Financial Freedom. Read stuff on Personal Finance. Examine the choices your friends and colleagues make – there is a lot to learn from others’ behavior, including what not to do. Know about the tax laws that apply to your earnings and investments. Understand the basics of how the economy works (yes, even if you don’t decide to major in the subject!).

Also, know that there is a lot of misguided advice out there – on the Internet as well as in Print. Figure out which folks make more sense than others. Figure out how to differentiate the noise from the music. It is not rocket science. You are an intelligent being. You can do it. And, once you get the hang of it, keep the momentum going. After all, learning is a continuous process…

Bonus Tip: Avoid Debt like a Death Trap – unless it is to build an “asset” (i.e. something that appreciates in value over time). For all other things, buy only what you can afford to buy without borrowing money. Unfortunately, that means saying no to that BMW you can “easily” afford on a 7-year lease plan. Remember, some of the wealthiest folks on this planet live far below their means. Borrow funds only if you can put them to work and build something that increases in value, instead.

Sometimes, We Forget

I chanced upon a wonderful post on Sakshi Nanda's 'Between Write and Wrong' blog, entitled "Sometimes, we forget to tell our children…". In it, Nanda details a number of elements that I regard as having tremendous significance for us as parents.  

We forget to tell our children …

That our dreams about you do not dictate your future, but your dreams of the future are ours to dream. You go ahead and become what you want, and we’ll watch your back – ready with our ears, our hands and shoulders, whichever you may require. You figure life out, leave home, choose, do, lead – for today belongs to you. Not to our age-old myths, time-weathered ideas or unfounded fears.

I couldn't agree more. I personally know of countless folks who spent the better part of their youth chasing the dreams of their parents, or even their grandparents! As parents, we have a duty to equip our children with roots and wings. But we often confuse the two, imposing our antiquated beliefs and desires onto them – leaving them with a moral obligation to carry these through.

And, it's not just career and ambition that Nanda writes about. There's more.

We forget to tell our children …

That we will never remind you of all that we did for you – like favours, or debts or burdens forever for your shoulders. We did what we could and best. Just as you will too one day, for your child. If we were to make a list, then perhaps we did not understand the meaning of what it is to be a mother to a child or a father to a child. Not everything is quantifiable. If it is, then perhaps it’s an expectancy from tomorrow. Let there be nothing expected by us from your side, except respect and love. And let us as parents understand how best to earn those two from you too.

Another truth that hits home. Millions of parents spend their lives sacrificing almost everything to help their children get more from Life, and then spend their remaining years expecting the favor to be returned. That's just not fair. Every human being should be able to decide how best to live their life – on their own terms. Parents should be able to expect respect and love from their children, and nothing more. 

Don't forget to read Nanda's post in its entirety. There's something in it for every parent.


Words Can Hurt

In an excellent writeup I encountered via Facebook, a ‘team mom’ writes about “5 Things Parents Shouldn’t Say to Their Kids“. The premise of the article is that the best of parents can do with some help and guidance on things to avoid saying to their children, because “how moms and dads communicate with their kids directly impacts the parent-child relationship long term”.

Here’s the list in brief, but I’d highly recommend you read the entire article…

  1. “I don’t care.”
  2. “Act your age!”
  3. “Say you’re sorry!”
  4. “Don’t you get it?”
  5. “I’m going to leave without you!”

The post not only explains each of these in detail, but also offers helpful suggestions on what to do instead. Take the time to read this one. You won’t regret it.



A post on Neeraj’s blog opens up an interesting debate on Identity – the issue of growing up in one country, migrating to another and rasing a child in a new culture…

But what about my son? He’s not American. Unless I invest a lot of time explaining the very rich cultural intricacies of his country of birth, he’ll be in no-man’s land for the rest of his life. The missus pointed out that he doesn’t even look American. If he stays in America, his ABCD (American Born Confused Desi i.e. Indian) counterparts will probably be black belts in Bharatnatyam, Carnatic/Hindustani music and would know the operational details of organizing satsangs. I can’t teach him these things because I don’t know them. If we all go back to India, it’s going to be spectacularly unfair on him. India’s cultural heritage isn’t something to be scoffed at and it isn’t something you can just pick up as you “go along”. There is no “hit the ground running”. It’s a slow burn, melding into the fabric of the country one day at a time.

As it turns out, the author has decided to adopt the braver choice…

If he does grow up in America, I need to steel myself for the moments when the influence of his adopted country and his peer group will clash with what I’ve been taught to dislike or disapprove. It won’t just be a generation gap I’ll battle, it will also be a cultural gap.

But I’d rather be the parent who accords his child the right to take a stand and then engage in debate, rather than obfuscate his sense of identity with a hybrid, meaningless amalgam of cultures and then be responsible for his disillusionment.

As I read through the post, it occured to me that on a more generic level, the issue he has written about is similar to many more that parents face – even those that haven’t migrated to a foreign land. And, that is : “Should you allow your children to live Life on their own terms or not?”

It is great that, as a parent, Neeraj is aware of the complexities involved and is willing to take the path less trodden, even if he doesn’t have all the answers yet. Like him, me and the mrs. have also chosen to tread that path. That is why we encourage both our children to ask questions and think for themselves. That is why we don’t dumb down our answers when we speak to our children. That is why they are both turning out to be precocious little humans.

Yes, it takes more energy to field their questions, rather than taking the easy way out. Yes, they are turning out to be more assertive and strong-willed than their peers. Yes, there is a good chance that their ways will diverge from our’s when the time comes, and we may not be able to do much about that. But, if it helps them cope with what Life has to offer on their own terms… if it makes them better individuals… it would all be worth it.

May the force be with us all.

The Present

Quick on the heels of my last post, comes another one that focuses on what truly matters when you’re a parent.

In a blog post entitled – The Power of Presence – Mike Shippey offers a wonderfully-written, thought-provoking reminder of the power we wield as parents, and how we can put it to good use…

When your child wants to talk to you about something…listen.  And don’t just listen, but make eye contact.  And don’t just make eye contact, bend down or get on one knee and get face to face with them.  Really and truly look them in the eye.  And pay attention.

Nothing makes a child feel as safe and secure or loved and cared for as a parent who takes the time to listen.

Kids are pure, man.  I mean they are the real deal.  They have no real concept of time or boundaries, their imaginations run wild, they are naturally happy and curious, and they will ask anything.  They ask because they want the answers.  And the first place they look is the ultimate storehouse of knowledge…mom or dad.

Imagine that you are a super hero.  Because, if you have children, you are.  To those kids you are the bravest, strongest, smartest, and most influential person n the planet.  As far as they are concerned, you know everything and you can do anything.  And so, when they need an answer or a solution, some love, attention or just a person to share their feelings with…they come to you.

It doesn’t take much to be a superhero to your child.  And yet, so many of us (well-meaning parents) focus on the stuff that doesn’t really matter in the end. 

As Shippey says, “Just be present.  Be real.  Be a parent.  Be a hero.”

Forgotten Truths

A tweet from my friend Jin Yang reminded me of how often we adults take children for granted, and how important it is to follow through what they’re trying to say to us.

Yang’s tweet was about a blog post called Wood Tape, in which Scott Nesin writes about an incident that happened with his son. What follows is a remarkable account of what can happen if you give your children a listen.  Here’s just a brief excerpt, though you really need to read the entire post:

My wife calls me at work, and we have the usual end-of-the-day chat. Then:
“Oh, by the way, Guy wants you to take him to the hardware store, he wants to get some tape.”
“What kind of tape?”
“He says he wants ‘wood tape’.”
“Wood tape?”
“Wood tape.”
“Uhhh, ok. When?”
“Sometime this weekend. He is really looking forward to going.”

Guy is my four-year-old son. No problem, I just need a fraction of an excuse to visit a hardware store…

After the entire story had unfolded, Nesin writes:

… I think back over the day and see the signs now. I remember earlier bits and pieces that all make sense. I should not be surprised, this is not the first time something like this has happened. I certainly didn’t think it was beyond a four-year-old’s ability, but I just never saw it coming. I keep trying not to underestimate the little stinkers, but they keep sneaking up on me.

My own predicament is no different.  As a parent, I try my best not to underestimate my children, by encouraging them to voice their thoughts and see them through.  Despite that, time and again, I have been surprised by the immense potential that they show to absorb a new concept or embrace a new idea or deliver on something that I would not expect them to do at such an early age.

Nesin’s post was a reminder that the limitations exist only in our minds, as adults.  Perhaps, because we have forgotten how to be like children.

Lessons I’ve Learned – 1

A fellow mommy blogger posted an interesting piece entitled “Five things motherhood/parenthood has taught me“, and tagged me in it.  I thought it was a great idea to use the opportunity to put down some of my own learnings on the subject.  Though, I must confess, I have a feeling that this is going to be just one in a series of such posts on my part, hence the number 1 at the end.

In his poem The Rainbow, William Wordsworth remarked “The child is father of the Man”. I never really understood what that meant until I became a parent. Over the years, my little kids have taught me a whole lot, and I’m sure it’s just the beginning. I’ve  also come to learn a lot about being a parent, and some of that may be useful to you.

So, here are some of the most important lessons I’ve learned in my journey as a parent:

1. Your children need your presence more than your presents.  – Jesse Jackson

Time and again, I have found myself being surprised by the amount of joy my children experience, just by virtue of me or the mrs. spending some good quality time with them.  Not to mention the number of occasions on which a single piece of chocolate or a toy that costs less than 20 bucks can make their day!

Excess is for losers, I say. Don’t think you need to buy them expensive gifts to make them happy. Your children need your presence more.

2. Don’t handicap your children by making their lives easy.  – Robert A. Heinlein

In Life, as in Parenting, you gotta make some tough calls at times.  Every parent needs to do it.  And, every parent should.  Even if it means upsetting your child for the moment, and resisting the temptation of spoiling him/her.

So keep your own needs (of gratitude) aside, and take the decision that is in the best interest of your child. Every time. You cannot fix everything for them. They gotta handle some of Life on their own.

3. The quickest way for a parent to get a child’s attention is to sit down and look comfortable.  – Lane Olinghouse

If you’re considering being a parent, and simultaneously entertaining the notion that Life will still offer you opportunities to have some “quiet time” every day, forget about it!  At least for the first 4-5 years of your child, it’s going to be all about your child.  No, really.  Get used to the idea, and you’ll do just fine.

And yes, in case you’re wondering, it is worth the effort!

4. What a child doesn’t receive he can seldom later give.  – P.D. James

Your children will do as you do, not as you say.  So, the best thing you can do for them is lead by example.  Sometimes, that also means apologizing to them.

If you think you can simply instruct them to live life a certain way, while you continue to do the opposite, you’re in for a big surprise!

5. The trouble with being a parent is that by the time you are experienced, you are unemployed.  – Author Unknown

It’s true.  No matter how much you prepare for it, you’re never going to be fully prepared for what is going to unfold in your life as a parent.  So, the sooner you learn to relax and only sweat the essentials, the happier you’ll be as a family

More to come…

The Game Is Afoot!

Thanks to a re-tweet by a friend, I discovered a really well-written piece by Natasha Badhwar (Indian Express) on what it means for her to grow up with her kids. 

The essay is generously laced with humour and insight, and has a lot to offer, not just for those of you who may be trying to understand what parenting involves, but also for young parents like us who can use some welcome tips to help us make the most of our experience!  Here are some excerpts…

We are parents of three children, but don’t let the number distract you. The more they are, the better pictures they make. The more they are, the more time off a parent gets. The higher the sense of achievement when one gets anything done at all. Like being on time for the school bus…

Like everyone else around me, I embarked on parenthood with my own set of delusions. Eight years into the game, I’ve lost a lot of the wisdom that had seemed a natural gift. I feel lighter. My learning is inconclusive and contradictory and doesn’t work all the time. Quite like the children I learnt them from. After all, it’s still early years.

I call it a game, because that inspires us to play. Play demands creativity, one gets better with practice and if one keeps up the spirit, then laughter and fun comes along. Play can get difficult; it requires fitness and training.  

I especially love the analogy about parenting as a “game”.  Being a father of two kids myself, I know how much work can go into being a good parent.  And, at the same time, the act of being a parent can be so incredibly rewarding and filled with joy, that it can get quite impossible to explain to any non-parent, on a logical level, why so many of us opt to have children!  That’s why the “game” analogy makes perfect sense.

But, that’s not all you can get from Badhwar’s write-up.  Here’s some more…

Parenting demands that we have to be more present, rather than absent. It’s easier to be away at work, far easier to be stuck in traffic every day. Parents love Mondays. If you work at home, you get to send the kids away, if you work outside, you get to send yourself away. Monday is parents’ secret Saturday. But eventually, our children will give each other what they get from us…

So I make a game out of this too. We are all crew and cast on a film set. Sometimes I am allowed to raise my voice because I am the Director. I always make up for it with my crew and actors afterwards, because you know, I need them on the sets tomorrow. This film depends on their motivation, I couldn’t pay anyone to act in this one…

If you’re still wondering why parents enjoy parenting so much, I’ll offer you some more of Badhwar’s words, in response: “They remind us of what we were like when we started out. What we can be like, what can be reclaimed.

Simply put, children are reminders of the best that Life can be.

Dealing with Bullies

An excellent post on KidsHealth got me thinking about the imminent dangers of my children getting bullied in school…

Most kids have been teased by a sibling or a friend at some point. And it’s not usually harmful when done in a playful, friendly, and mutual way, and both kids find it funny. But when teasing becomes hurtful, unkind, and constant, it crosses the line into bullying and needs to stop.

It’s important to take bullying seriously and not just brush it off as something that kids have to “tough out.” The effects can be serious and affect kids’ sense of self-worth and future relationships. In severe cases, bullying has contributed to tragedies, such as school shootings.

The KidsHealth writeup offers many helpful pointers on how to spot the problem and how to deal with it.  So, do give it a good read

The Mayo Clinic also supports the view that bullying is a serious issue, and offers more helpful advice…

Bullying was once considered a childhood rite of passage. Today, however, bullying is recognized as a serious problem. Up to half of all children are bullied at some point during their school years, according to the American Academy of Child and Adolescent Psychiatry. And thanks to tech-savvy kids, cyberbullying and other forms of electronic harassment are now commonplace.

To help your child handle school bullying, learn to recognize it – and know how to respond.

You may think this is a problem that does not affect your kids today, but unless you learn to read the signs, how will you know?

The Big Question

Hot on the heels of my last post – All Joy, No Fun? – comes one that examines the “Case for Having More Kids“, thanks to a thought-provoking writeup by Bryan Caplan in the Wall Street Journal…

Amid the Father’s Day festivities, many of us are privately asking a Scroogely question: “Having kids — what’s in it for me?”

Most of us believe that kids used to be a valuable economic asset. They worked the farm, and supported you in retirement. In the modern world, the story goes, the economic benefits of having kids seem to have faded away. While parents today make massive personal and financial sacrifices, children barely reciprocate.

Many conclude that if you value your happiness and spending money, the only way to win the modern parenting game is not to play.

The WSJ article cites a number of helpful studies, hard facts and relevant statistics.  It is worth reading in entirety, even if you’re remotely interested in the “big question” – Should you have kids? 

Most notably, however, the writeup offers some real solutions to some of the biggest problems concerning parenting!

The main problem with parenting pessimists, though, is that they assume there’s no acceptable way to make parenting less work and more fun. Parents may feel like their pressure, encouragement, money and time are all that stands between their kids and failure. But decades’ worth of twin and adoption research says the opposite: Parents have a lot more room to safely maneuver than they realize, because the long-run effects of parenting on children’s outcomes are much smaller than they look.

If you enjoy reading with your children, wonderful. But if you skip the nightly book, you’re not stunting their intelligence, ruining their chances for college or dooming them to a dead-end job. The same goes for the other dilemmas that weigh on parents’ consciences. Watching television, playing sports, eating vegetables, living in the right neighborhood: Your choices have little effect on your kids’ development, so it’s OK to relax. In fact, relaxing is better for the whole family. Riding your kids “for their own good” rarely pays off, and it may hurt how your children feel about you.

If you simply don’t like kids, research has little to say to you. If however you’re interested in kids, but scared of the sacrifices, research has two big lessons. First, parents’ sacrifice is much smaller than it looks, and childless and single is far inferior to married with children. Second, parents’ sacrifice is much larger than it has to be. Twin and adoption research shows that you don’t have to go the extra mile to prepare your kids for the future. Instead of trying to mold your children into perfect adults, you can safely kick back, relax and enjoy your journey together – and seriously consider adding another passenger.

I only wish I’d known of all this, earlier.  On the other hand, it’s never too late to improve…