My father had very definite ideas about what life-skills were essential for his kids to acquire.
Finished your 10th standard school board exams? Sign up for the touch-typing class at the friendly neighbourhood secretarial school. Just got your drivers’ license? Sorry, you can’t take the car out until you show me you can change a tyre. On your own. Oh, and financial literacy? Four years old was his idea of the ideal time to learn about the power of compounding.
When I was seven and my sister four, my parents started giving us a weekly allowance. Except that they didn’t actually hand over the cold hard cash to put in our pockets — they bought us a blue accounting ledger, and gave us each a page in it. Every week, I’d enter our weekly pocket money in the credit column, and update the total balance in our “accounts”.
Every week, I’d enter our weekly pocket money in the credit column, and update the total balance in our “accounts”.
Once a month — power of compounding, remember, simple interest is for dummies — we’d calculate how much interest we were owed, and credit that to our respective accounts.
We WERE allowed to spend it — but it wasn’t as simple as just making a debit entry into the ledger. No, this is where my father introduced us to the concept of incentives. Or why you should buy instead of rent. Or how it pays to invest in infrastructure. Or something.
We could, theoretically, buy whatever we wanted as long as it cost less than our ledger balance. But we had a “big-ticket item” threshold, so if we decided to save up and splurge on something that cost more than that, the parents would pay half of the big-ticket item’s price. That is, we’d get a 50% subsidy on capital investment.
So as kids, we ended up with electric trains, mini-microscopes, chemistry sets, and the absolutely awesome Playmobil pirate ship, and manufactured clothes for the Barbies out of old socks instead of buying them ready-made. Which, I suppose, is a positive parenting outcome if you’re aiming to manipulate toy-buying behaviour.
So as kids, we ended up with electric trains, mini-microscopes, chemistry sets, and the absolutely awesome Playmobil pirate ship, and manufactured clothes for the Barbies out of old socks
Then there were the good-behaviour incentives. Or, now that I look back from the vantage point of adulthood, the fizzy-drinks-are-bad-for-you incentives.
Every Sunday, on the way back from church, we had a choice: go get takeout food and Pepsi, or go buy a Matchbox model car. My sister and I (and our brother, when he started getting an allowance that we, er, “managed” for him) pretty much fell for this scam, and today we have battered up toy cars of all kinds and I never have any cola in my fridge.
My father then took it up a notch: We could go buy our model car, or we could get the price of the car as a credit in the Blue Book (where it would earn interest as well, remember?). And we fell for that too, rotating the “Matchbox money” between us week on week.
I think the fact that all of us ended up as remarkably solvent adults, despite picking not-normally-associated-with-solvency professions (journalism, architecture, diving — Dad obviously needed a scheme for long-term vision) can be safely laid at the door of this boot camp.
Of course, I’ve also ended up with a 12-page spreadsheet that I need to update every day with expenses split across ten categories summed up on a page that checks the running totals against monthly budgets and annual budgets and oh hey, maybe I should put in a row that compares to last year’s total expenses as well…