Duty of parents to impart financial skills
WHEN it comes to financial matters, we tend to think that it’s the older generation who gets into financial troubles. However, times have changed. Today, young people are also facing this problem.
According to a Bank Negara Malaysia report, almost half of Malaysian youths are grappling with high credit card debt, based on a 2017 data.
Forty-seven per cent of Malaysian youths have high credit card debt, while 38 per cent have taken out personal loans.
This is an alarming trend because they’re in what I call “red financial zone”. It’s dangerous when they spend more than they earn.
How do they finance their lifestyle then? By living on credit, of course. They’re just months, if not days away, from the “black zone,” which is bankruptcy.
For as long as they can pay off the minimum balance on the credit card or the monthly personal loan payment, they’d be fine. But what happens when there’s an emergency, one that may squeeze their finances further?
Usually they’ll forgo such loan payments first. Things may get worse from there. Pretty soon, they’ll start receiving calls from the banks.
Ideally, everyone should be living in the “green zone” where they only spend about 70 per cent of their income and allocate the rest into short and longterm savings.
Unfortunately, many young people fail to do this. Instead, they succumb to temptations such as online shopping, the latest gadgets or pricey coffee.
But before we start blaming them, let’s review our roles as parents and elder siblings. Are we showing the right example? Have we taught them financial skills?
RID THE ENTITLEMENT MENTALITY
As financial education isn’t taught in schools, the responsibility falls on parents. We must ensure that our children understand the value of money. Teach and show them the meaning of delayed gratification — when they need to save first before they spend.
One simple way to achieve this is to provide weekly pocket money for primary school children and monthly allowance for teenagers.
Discuss the appropriate amount and let them manage the cash flow. If they finish their cash too soon, let them suffer the pain and learn from the experience. They’ll get the hang of it eventually.
Another enemy of the young ones is the entitlement mentality. Parents may have been too easy in rewarding them, for example, buying all sorts of things without analysing the impact.
The action could be driven by guilt on the parents’ side.
Children will learn that they can easily obtain material things even if they don’t deserve it.
Once the generosity stops, they’ll complain or even throw a tantrum. Parents are then trapped into buying more things.
For the sake of their future, parents need to be firmer in showing them the right financial way.
Don’t simply splash the cash even if you can afford it.
Let them earn their living, not just by delivering academically, but more importantly by behaving well and giving their best in everything they do.
Hopefully, our children will not be part of the negative financial statistics in the future.