Give your children assets, not liabilities

Parents wanting to give their children the luxuries they themselves didn't have may not be doing their children any favours when it comes to developing money management skills.

A proverb

A man was sitting next to a cocoon. He suddenly saw a small slit forming on the surface. Inside was a tiny butterfly trying hard to come out of the cocoon. The man kept watching for sometime. Soon, he found that the butterfly was tired and was not making any progress. Being kind-hearted, the man got a pair of scissors and cut open the cocoon. Out came the butterfly. The man became very happy and waited for the butterfly to fly away - seconds, minutes and then hours passed by but the butterfly could not fly. In fact, it never flew for the rest of its life. The reason? The butterfly has to struggle to come out of its cocoon - the more it struggles, the stronger it becomes. Finally, when it tears open the cocoon, fluid flows into its wings making them strong enough to fly. The man, in his kindness, did not allow the butterfly to struggle and tear open the cocoon. As a result, the fluid did not reach the butterfly’s wings and it could not fly - ever.

Too many people keep opening cocoons for their children

This behaviour is more observed in cases of parents who had to struggle in their childhood and initial years of their career and who are now well-to-do. These parents believe giving comfort to their children is their prime responsibility. They do not want their children to struggle the same way they did. But, by depriving their children of the struggle, they are depriving their children of growth.

Parents can allow their children to struggle initially – when parents themselves are hail and healthy. This will ensure that even if the children fumble, the parents are there to take care. Alternatively, parents can give children comforts earlier and then let them struggle in later years – in all probability, parents may not be around then.

Children inherit their parent's spending behaviour. Unfortunately, they will not inherit their parent's earning strengths. Their earning is dependent on their qualifications, skills, experiences and circumstances. Parents must ensure their children cultivate spending patterns which can be sustained in the ups and downs of career - and not give them unreasonable spending habits – those will be their liabilities.

There is a saying: "Give a beggar a fish and you would feed him for a day. Teach him fishing and you would feed him for a lifetime."

All parents obviously want their children capable enough to create substantial wealth for themselves. The best way is to give your children assets - not necessarily materialistic assets – but rather, strength to struggle and survive, making them strong decision-makers, allowing them to be responsible for their decisions.

Readers may feel that the above discussion is inappropriate in a financial planning column. However, in Asia, wealth does not stay for more than three generations. If we need to sustain wealth for more generations, then there is a need to raise wealth-savvy children and not wealth-spending children!

Gaurav Mashruwala CFP is a financial planner in Mumbai, India.

Reproduced with permission from financial alert.

Last updated on 25 October 2017.