Neither a borrower nor a lender be For loan oft loses both itself and friend — and borrowing dulls the edge of husbandry. — Hamlet Act I, Scene III
Thus is my attitude towards money succinctly summarized in this famous quote from the play by William Shakespeare. In the scene, Lord Polonius gives counsel to his son, Laertes, who is about to go off on a journey to another country. Among his admonitions are the dangers of lending and borrowing money. Lending is risky, he says, for in case of default, he may not only lose money but friends as well. On the other hand, borrowing money from others may tempt him to abandon thrift (or “husbandry”) and cause him to live beyond his means. But while Polonius’s words of advice have been recently cited by many financial observers following the global financial meltdown, it does not mean, however, that I am averse to the lending or borrowing of money. I’m sure that there will always be specific instances when they will be warranted. The wisdom I take away from his guidance is to always strive for financial independence through self-reliance and living within one’s means.
A large part of my outlook about money is driven by my experiences growing up. We lived a pretty frugal life because of the life my father chose. Although, as he constantly reminded us, “Providence” always came to help us out whenever we needed it the most, it still caused me to develop a lifelong phobia about financial security. And so, ever since I started working, I’ve always tried to keep a simple personal lifestyle and to squirrel away as much as I can of what I earn. Given my background, I think that it would have been perfectly natural for me to want to treat my children differently and to spoil them. And to a certain extent, I guess I do. Fortunately, my phobia keeps me in check. It helps a lot, too, that my wife spends money even more sensibly than I. Now that my kids are growing up, however, I realize that I have to be more organized in the way I teach them about money and finances so that they do not turn out to be Lord Polonius’s (and Alan Greenspan’s) worst nightmare — “irrationally exuberant” spenders who have no money in their names and tons of debt. Here are some tips from the experts on how to teach our kids about “dollars and sense.”
• Put your money where your mouth is. First of all, no matter what we tell our children about money, our actions will speak much louder than our words. There are no ifs and buts about this. We need to actually live up to the kind of financial behaviors that we want our children to follow.
• The Apprentice. Just like in Donald Trump’s game show, we have to give our children opportunities to actually handle money so that we can evaluate how well they can deal with it. Unlike Trump, however, we can’t “fire” them when they mess up. It is our parental responsibility to ensure that they eventually get it right. Of course, everything has to always be age-appropriate as Barbara Weltman writes in her book The Complete Idiot’s Guide to Money-Smart Kids. For preschool to early grade school-age children, the primary goal should be making sure that they understand basic money concepts. For example, do they even know what a P100 bill looks like? I’m pretty sure that my son has this down pat now since he started sorting money depending on which national hero is featured on the bill! Do they understand that you need to work to earn money? At one time, my son thought that “making” money was just as simple as getting it from the ATM! Do they understand that everything we use costs money? One way to make them grasp this concept is by taking them with us when we go to the supermarket. We can also let them start making small purchases on their own and learn how to count their change. A word of warning, however: Just because our children may be “math smart” does not necessarily mean that they already know how to handle money!
As a child breaches the 10-year-old mark, it might be time to trade their piggy bank for a real savings account. I remember one thrill that I got as a young boy was going to the bank to open my very own account, signature-cards and all. This might also be a good time to start giving the child a regular allowance and to help them set up a simple budget and savings plan. As they will likely be already buying things on their own, they will also need to be guided on the concepts of “needs vs. wants” and “shopping for value.” I have been fortunate in that one of the very first things my daughter learned from her mom was to always check if something was “on sale!” Since my daughter also still hardly asks us to buy her anything except the basic stuff, we have not yet found it necessary to start giving her a regular allowance. Regarding allowances, it is significant to note that majority of experts do not recommend linking chores to allowances. As one observer put it, the family is not a “business.” Children should do chores not because they’ll be rewarded with cash but because they’re part of a family. Similarly, linking grades to financial rewards may also be counterproductive. They say that kids ought to learn that doing their work well is its own reward. Introducing money into the picture might undermine this message.
As they reach their teen years, one thing that experts say is critical for the youth to fully comprehend is the concept of debt. According to some studies, many teens don’t even realize that credit cards are a form of borrowing. Nothing also teaches about the value of money as effectively as actually working for it. Although it is not common for Filipino teenagers (particularly those who belong to middle-class families and up) to work part-time, this is something that we parents ought to seriously consider. With actual work experience, our kids will also find it easier to understand other more advanced concepts like wages, taxes, etc.
• Can’t buy me love. I would be a hypocrite if I say that money doesn’t make the world go ’round. And as harsh as this reality might be, we ought not to sugar-coat it to our children. Be that as it may, money is far from everything. As the Beatles sang, “Money can’t buy me love.” Money is a necessary tool that man has invented in order to manage and share value. It is, however, merely our slave and not our master. We need to ensure that our children never forget that there are other more important things in life such as faith, family, friendship, charity, justice, and of course, love. This must be at the end of each money lesson that we give our children. Borrowing another phrase from Hamlet, “It must follow, as the night the day.”
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