How to help your child become smart about money

By Sourajit Aiyer

— This article was originally published in Straits Times, Singapore.

Most parents aspire that their children achieve more than they did. One such area should be better money management.

But how do parents ensure their kids turn out smarter in money management than they are? After all, many parents of our generation are found lacking in money management skills, while most schools do not teach basic money management either.

This is a skill best learnt early, but where would they learn this skill from? In fact, today’s children have to understand this skill more than ever, for their own good. In this age of rampant consumerism and peer group pressure, when children increasingly want to spend as they like, any foolish spending by children can end up causing strain to the family. Besides, the children carry on such habits as they grow up.

Some mobile apps aimed at kids (and their parents) have come up in several countries, aiming to inculcate smart money management habits. Slonkit is one such app that has become immensely popular in India among children and their parents alike.

PlayMoolah is a similar platform that has gained immense popularity in Singapore. Where these apps differ from Bankaroo, the original child-focused financial literacy app, is their real-life platform, which helps teach good money habits in a realistic and practical manner.

For example: Slonkit tied up with Visa and DCB Bank to provide a real, pre-paid reloadable card which the child can use, backed by the mobile app which the child and his parents use to monitor/manage the spending. Bankaroo, on the other hand, provided just a pretend environment.

What these apps do is they virtualise the child’s pocket-money. The child is the actual user, the parents are the enablers, since they provide the pocket-money into the app, and both engage on the app together, through the spending and saving process. The app’s platform provides the basics of financial literacy as a foundation.

The technology behind these mobile apps ensures a secure environment, which is unlike the grubby way children maintain their actual currency. The mobile app gives information on various offers on food, shopping, transport, etc., so that the child understands the importance of searching for “value-for-money” through best deals, instead of just blindly spending on the first option that comes his/her way or suggested by his/her friends.

The mobile app also provides rewards for good spending behaviour. While stern parents will say expecting a reward to be good is not advisable for children, it is still better than the alternative, wherein children grow up with an irresponsible money management brain.

Slonkit controls the risk of spending beyond one’s limits. First, the card it provides is pre-paid, not credit; second, it is not linked to the parents’ debit/credit card, so that the child does not intentionally pull his parents’ money for any foolish spending; and third, since the parent is also part of the mobile app, he/she gets regular alerts whenever the child spends with the card.

The child also gets updates on how to better use his/her money, along with insights on his/her spendings. The child can also opt to pay his share separately, while with friends — going Dutch. The card can be used online or in stores, and can be reloaded at an instant. It also provides the convenience of signing-in through the social-media accounts.

PlayMoolah’s WhyMoolah simulator goes a step further. It includes life-stage decisions till the mid-30s — things like marriage, first home, etc. Users learn about budgeting, costing and managing money for such important life-stage goals.

But does one really need such apps? First, since most parents are not great at money management themselves, how can they teach good money habits to their children?

Second, an age-old issue of parenthood is that the verbal advice by the parent will fall on deaf ears beyond a point. So, even if parents are knowledgeable and give financial advice to their kids, the child will deliberately choose not to listen, simply owing to the fact that it’s coming from the parent.

Third, such mobile apps give a degree of freedom to the child, who wants to spend as he or she likes, yet provide an institutionalized platform to inculcate some degree of financial responsibility, i.e. transforms the verbal advice of the parent into a third-person platform. These apps provide an excellent platform to develop smart money management habits in children in a controlled, yet practical environment during their growing-up process.

Lastly, feedback from existing users has been positive in terms of how much they have learnt about money management by using such platforms. The apps measure their success a lot on the feedback from users.

Therefore, parents who are anxious to inculcate this necessary habit in their children can take solace from such utility apps. It can become a part of life for the child during his/her growing-up years, which should augur well for the child as he or she grows into a financially responsible adult — way smarter in money habits than his parents ever were!

— Sourajit Aiyer works with a leading capital markets company in Mumbai.