How to Raise Financially Responsible Children – Decoding the Herculean Task of Doing it Right

“We cannot always build a future for our youth, but we can always build our youth for the future.” ― Franklin D. Roosevelt


With COVID-19 doing the rounds and in testing times like these, this old saying holds a lot of significance in today’s world. 

Raising well-rounded children is probably one of the trickiest tasks for all parents or parties involved. While every kid’s childhood should be about making memories – filled with cuddles, joy, laughter, and love, it is also equally important for them to have a balanced upbringing – one where you nurture them to be financially independent, prudent, and resilient. At a very young age, most children start imitating their parents, and therefore it is vital for adults-in-charge of care to set an example from the get-go. 

While moral parenting is the most crucial aspect of child-rearing, teaching them about the other realities of life, including budgeting and success, talking to them about making the buck and its responsibilities, and cultivating leadership skills, etc., isn’t a straightforward mission. Honestly, there is no science or secret ingredient to it, but in this article, we aim to share a few best practises to raise children responsibly while handling the ‘moolah’ obligations of the real world for it is not only sufficient to make money, but it is also imperative to handle it well. 

First and foremost, money habits begin at home and very early on – always be vocal and transparent about money, budgets, and more. To start off, it is not necessary that your kid must accurately know how much you earn or save, but they must aware of how much the candy they crave for costs. This helps them compare. A general scale of economics can be introduced when the kid is young itself. For example, the kid doesn’t need to know how much an airplane costs exactly, but they can be educated that it costs more than a car, which costs more than a bike, which in turn costs more than the candy they want. This helps them make micro-decisions like in a supermarket, which will help develop their calculative skills and make better money judgments in the future. 

Learn to say “No” – the hardest of them all but also the most crucial. I know it probably breaks your heart to deny your child what they want at that moment, but sometimes teaching restraint is key to learning the concept of compromise. This helps put things in perspective to slowly introduce the idea of saving for the future.

Engage them in household chores and provide pocket money accordingly – this helps outline some basic responsibilities and teaches them the work-and-get-paid model. Not necessarily that all chores have to be salaried, some chores are for learning and experiencing. This helps them divide activities and understand how to manage a regular allowance system. Offer extra bonuses, incentives, and rewards if they are regular and organized so they feel recognized, valued, and respected. However, ensure that this doesn’t become a complete barter system.  

Teach, but don’t over teach – always understand who they are, use small examples, and try to speak in their language. Create new definitions and use practical models to explain novel and intangible concepts. Kids are keen and early observers and are always learning the silent lessons too. So, make sure you are always aware of what you are saying and how you are behaving around them as they pick up on things when you least expect. 

Real money is the real deal – give them real money (of course in small amounts) and explain how to distribute their funds. Play money doesn’t always set the tone of seriousness required to teach them about money management. 

Keep an account and do a regular tally – spend time with them and create flowcharts to make it easy to track all expenses. Introduce simple financial tools that they can use to handle money matters. 

Don’t make them scared of failing – this is a very important lesson to instil. Handling failures is part and parcel in the journey of learning. Let them know that it’s perfectly okay to fail and let them experience the consequences of failing but at the same time, help them make notes on what caused the obstacles in the first place and brainstorm strategies to overcome them the next time around.

Dividing money – show them how to split their money, this even helps track spending. Teach them how to create a monthly plan and allot money for different purposes, including buying essentials, clearing bills, saving for the future, and even keeping a fixed amount to donate. In addition, introducing a tax jar, where they put a portion of their money each month, can be a useful and concrete way of raising financially sensible children. It is also very important to let them keep some money aside to do their “fun” things.

The two big S – Savings and Success – needless to say, the essential elements in the scheme of big things. Communicate the importance of savings and investment by using applied methodologies. For example, let them have not one but multiple savings jars – one short term for immediate wishes, medium-term savings jars for planned expenditure, and the last one for the long term, which includes goals-based desires or for emergency and uncertain scenarios. The last jar may be introduced at a later stage when they have a more pragmatic experience in saving. Also, teach them about the early relation between savings and success by narrating exciting stories and sharing motivating anecdotes, so they stay inspired to do just the same. 

Moral, parental and financial values all go hand in hand – being a model parent is no easy feat, but remember not just to teach but also to exhibit patience. Let them learn to wait to get goodies at times and teach them to compromise in some cases too. Try and educate them on the negatives of impulsive buying and how it will impact the structure they have created, however at the same time, let them know it’s alright to cave into yearnings once in a while. Keep them happy by keeping yourself and your family happy too. Do the small things that make you smile – happy parents raise happy kids. Express praise, encouragement, thankfulness, and appreciation when due, it always boosts morale. Display gratitude in dealing with your place in the race of life; this will take them a long way ahead as gratitude truly redefines the way one looks at and handles money. Don’t let them get bogged down with the cumbersome tasks of life; instead, teach them how to convert challenges into opportunities. While schooling on the principal lessons of life, remember to safeguard the innocence of their age and always create an amusing, innovative, and interactive way of learning. 

The art of giving – lessons on generosity can be imparted at a young age. They can always learn to keep aside a portion of their allowance to contribute to a charity/cause. Kindness and compassion taught in this manner generate a real sense of positivity and contentment. 

To sum it up, like most languages, financial literacy is not an easy project to master. But with the right balance and gears in place, we can try and raise kids to enjoy a successful and charged financial future.

Written by:
Prashanth Prabhu, Founder & Principal Investment Adviser – 29k Group

Published by:

Sheren Susairaj, Marketing Associate – 29k Investment Advisers Pvt. Ltd

Key to Protecting Client Assets: Understanding the Human Nature of Irrational Decisions

Tough times do not last, tough people do. At first, this quote may sound irrelevant to the title given above but, making clients understand that this too shall pass is sometimes difficult. Ask yourself, how many times have you allowed your emotions to rule in critical circumstances? Especially while looking at the current market scenario, the strongest of the investors might feel skeptical if you ask for investment solutions.

It is natural. When it comes to investment decision making, our emotions take over; the reason is human psychology behind it. We feel the pain of a loss to a greater extent compared to experiencing the joy of gaining. If you have observed, the emotional impact of loss is higher than of the equivalent gain – and it is called Prospect Theory or ‘loss-aversion’ theory.


Understand this with a simple example: in a situation, you are receiving $40 as an amount of utility, and in another situation, you gain $80 and then lose $40, so the remaining amount is $40 again. Here, the net gain is $40 but, the second situation disappoints you. According to this Prospect Theory, an investor tends to hold onto a losing stock longer than he should and sells winning stocks sooner than he should.

The fundamental logic would be holding onto winning stocks in order to boost the gains and selling of the losing stock in order to prevent the soaring losses. There is a sufficient number of analytical studies done on investment management. One study shows that when it is about selling winning stocks prematurely, people often settle for a lower guaranteed gain of $50 than a riskier yet higher gain of $500 or nothing. It is a matter of loss and gain or if put aptly, loss, and guaranteed gain.

For any financial adviser, it is essential to understand the human nature of making irrational decisions. It prevents you from being a victim or helps you to save your clients from doing the same. For further explanation, let’s take two quotes from William J. O’Neil’s How to Make Money in Stocks: A winning system in good times and bad.

  1. “A great trader once noted there are only two emotions in the market: hope and fear. The only problem is we hope when we should fear, and we fear when we should hope”. To avoid emotional decisions in investments, one can implement a relative strength system. It is a calculation that happens by the division of security price in routine, and it comes in life by plotting it on PnF (Point and Figure) chart. There is no grey line in the chart, it is either on buy signal or on sell signal. This permits you to construct a relative portfolio conducted in a consistent and sensible manner based on the strength system, which further helps you to make the right decisions. 
  2. “The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” Believe it; psychology often gets in the way of making reasonable decisions in unfavorable times. However, if you succeed in conveying the above quote to your client, you are playing a vital role in their asset management. 

    Furthermore, research by James O’Shaughnessy helps to establish credibility for the process. He tested everything from P/E ratios and price-to-cash flow ratios to market capitalization, profit margins, and relative strength. The research was conducted over a span from 1951 to 1996 where he examined things separately as well as with joint variables. The summary included one common factor in the top 10 performing strategies, and that was relative strength.Daniel Kahneman, a Nobel Prize winner in Economic Science, put an appropriate example in his speech. An investor notices the increase in his portfolio from $1 million to $1.5 million, whereas the other investor sees the fall to $2 million from $3 million. Who is happier? Sometimes, it is imperative for your clients to focus on the guaranteed least loss rather than a riskier gain. If a good strategy is working so far and suddenly shakes, it’s the timing to blame and not the strategy.

Keeping emotions on the check is challenging sometimes or rather often because several factors affect the stock market. It is difficult to spend energy on patience, which brings rational decisions as the brain is coping with multiple challenges. A right adviser uses the best of the knowledge to keep clients safe from loss and assists them in making the right decision in the tough times.

Interested in knowing how to protect your assets? We would love to have a word with you.

Written by:
Prashanth Prabhu, Founder & Principal Investment Adviser – 29k Group

Published by:

Sheren Susairaj, Marketing Associate – 29k Investment Advisers Pvt. Ltd