Expense AccountFinancial LiteracyInvestmentsMoneyMoney With MonikaPersonal FinanceMarch 13, 2021by Monika Halan4Bringing up rich baby – some parenting possibilities

When I wrote the raja beta and rani bitiya piece last week, I had no idea that it would touch such a nerve. As of today, the post on my personal blog has been viewed some 66,000 times and my first tweet reached more than 4.5 lakh people. There were many conversations around the topic as people weighed in with their own experiences of seeing a new generation of entitled young men and women living off their parents but trying to save the world. One 2017 HSBC study says that 55% of the surveyed households in India were still supporting their children well into adulthood.

This phenomenon of sudden affluence affecting parenting decisions is not an India specific problem. Smaller families and sudden affluence are twin factors that give the kids growing in such homes far more bargaining power than before, not just in India, but in other regions as well. For example, economists Sebastian Galiani, Matthew Staiger and Gustavo Torrens show in a paper that over the past 100 years American kids have managed to capture an increasing share of the household surplus due to better bargaining power in the home.

While parenting is itself a challenge, managing to keep the kids anchored to prudent money mantras for the newly affluent is even tougher. It is indeed tempting to use the blast from the credit card to zap away the problems for the newly affluent, but good parenting is about equipping the next gen with life skills rather than just access to parental wealth. There are five key areas of awareness for newly affluent parents. 

One, kids don’t listen, they watch. If you want financial prudence in the kids, then you need to exercise it in your own lives. If the difference between need, want and greed is not that clear in your money decisions, the fuzziness will pass on to the gen next. Do the dinner table conversations (I’m hoping that these happen physically and not through shared Instagram memes) sometimes revolve around buying new cars or high value gadgets or whatever for yourself that you don’t really need, but it is more of a JLT (just like that) spend? I’d worry about the signals that the kids are getting through this on such big ticket spends.

Two, honest money conversations on what is possible and what is not can begin from a very early age. Making the kids a part of the spending decisions gives them a voice and a stake in the outcomes. A new luxury car today vs an addition to the college fund are conversations that make the kids a part of the money decisions of the little unit called home. Peer pressure is tough and the desire to give in is very real when it can be bought rather than fought. Communicate that buying yourself into a group or social approval is a temporary fix and while the money might be there, but is that really what the child wants to do – buy approval?

Three, breaking down an unthought desire into its components and then allowing the child to make the decision. The Mac Donald’s Happy Meal comes with a burger, a drink, some fries and a small toy. It is what finance jargon calls a ‘bundled product’. I remember the time that my own kid wanted it at age five. I had no problem in buying it but broke down the decision for her – you don’t like fries, the burger is not the kind you really like and the drink on its own costs far less. Are we buying the toy or the meal? Are we buying because they are selling or we really really like the deal? If we do, sure, let’s get it. At age five she walked from the deal. And from many others after that.

Four, encouraging young adults to earn some money in the holidays gives them some idea of what it takes to buy that flat white so easily ordered and half drunk. Though I did not watch the series The Big Switch, reportson this reality show said that the very rich kids had a change of heart and habit when they switched roles with a poorer young adult. One of the participants is quoted in the story saying: “The first thing I did was hug my maid, driver and cook,” she says. “I thanked them for everything they had done to make me happy. My parents were really taken aback.”

Five, and this is the toughest, making money and what it can buy, a proxy for your attention and time is a slippery slope to financially spoilt rich kids. Figuring out that a small kid would rather play with mum rather than alone with an expensive gadget is a learning for a parent.

Parenting is about balance. To starve them of what your money can buy or over indulge can both have consequences. The best gift a baby gives the parent is the chance to reset their own lives one more time. Doing that is possibly the best parenting advice you can get.