SingaporeMotherhood | Preschooler & Up
February 2013
Windfalls – Panic vs Plan
Huat ah! Your child’s ang pow stash has given him grandiose dreams of buying his own iPhone/iPad/fill-in-the-blank here. You however, would prefer to bank and save the stash.
A distant family relative of mine led a happy, carefree life until his early forties. He had a modest income, simple needs and he didn’t aspire to live a more affluent lifestyle.
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Then the death of a parent left him with a sizeable inheritance. After he had passed through the stages of grief, what do you think he felt about the six-figure sum now sitting in his bank account? Joy? Excitement?
Actually, it was pure panic. There were midnight calls to relatives who were reasonably well-off to ask for advice. He wallowed in indecision on what to do with the money for months.
You hear of lottery winners and recipients of large inheritances squandering their money. Sound familiar? Sudden wealth can bring psychological problems, familial conflicts, reckless spending and a loss of money, friends, family and health.
Is it too early to teach our children sensible practices when it comes to managing windfalls? Perhaps to adults a present of a small sum of money during Chinese New Year is just a token.
But for someone who has no income and who has to ask Mummy or Daddy to buy an ice cream or some colouring pencils, the CNY loot – no matter how small – is a windfall and its mere presence can lead to confusing thoughts.
There are some simple steps that you can follow to help your child learn to cope with this sudden ‘wealth’.
1. Don’t make any decisions
Well, all right, we didn’t mean to do absolutely nothing. While Junior may spend the next week or so bugging you for this or that, remain h2 and do not buy anything. Let him know that you are thinking about his request, and that you have not come to a firm decision yet.
Better still, simply defer any spending decisions until your child is over the sudden euphoria. This will happen sooner rather than later, as new concerns crop up in his life and his attentions are directed elsewhere.
When you are both are safe from irrational decision making, sit your child down and explain the benefits of saving his money. Then park the money somewhere safe, in the savings account for example.
2. Allocate some play money
As any parent will know, if children are asked to totally abstain from having any fun with their money, they will pester you until you succumb to some irrational decision making of your own. Like giving in to their wants, to save yourself from total aggravation. So agree on setting aside a small sum (5-10 per cent) for them to purchase anything they wish. This way, everyone is satisfied. Mostly.
3. Review after six months
This is when the impulse to splurge wildly has passed and your child has had time to think about his or her dream purchases. With some sensible advice your child will have a plan of what to buy and good decisions will be made.
The goal is to instill an appreciation for planning and avoid making decisions that would be regretted later. And as a parent, that’s not a lesson we want to regret not teaching earlier.
So are there ways to help a child learn how to manage money more confidently?
A simple one might be using a wishlist to manage impulse requests. There is so much to buy and so much to want! And all parents dread the spectacular tantrums that kids can conjure up if they really really really want something.
Have your child prioritise the items on their wish list, and help them reflect on why they want something more than the other. Remind your kids to be discerning in their wish list and you might see the impulse request for random toys lose their place to more worthwhile items.
Better still, work within a budget and encourage them to do extra chores around the house to earn money and save up for that jaw-dropping, playground awe-inspiring must have item.
PlayMoolah is an award-winning online platform created to help children (from 6 to 12 years old) learn about money. Subscribe for postings on finance and online games for children by sending an email to [email protected] with the word “Subscribe” in the Subject line. DearAddy is a doting mother of two boys, former finance professional, marketer and mummy-in-residence for Playmoolah.com
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