Parenting a teenage child is an anxious few years as parents constantly worry about their children’s future. The most important thing in any parent’s mind during these agonizing years is the higher education of their children. From academic counselling to education fairs to scouting of universities, parents put all their strength in ensuring that their child gets admitted to a prestigious college. After all, a good education is insurance for a child’s future success!

While it is true that a good education helps in landing a well-paying job, it is another matter how your child handles her money in the future. After all, the skill to earn money cannot negate the tendency to spend impulsively. Increasingly, youngsters are courting financial distress in the early years of their working life (remember Sophia’s story from the last edition?)

Nysa had been in a similar predicament. Let’s see how she managed to get out of her troubles.

Money Mantra # 9

To achieve success, you need a life coach.

An intelligent and smart girl, Nysa, was raised with love and care. Her parents saw that she gets everything she wanted and never shared their financial position with her. Soon after college, Nysa got admitted into a good MBA college, and subsequently, got a job in a large MNC. The job took her away from home to a different city. There, her living expenses were significant, but her fat salary covered them.

The trouble started when Nysa made a few friends from the office and would frequently go out with them to expensive clubs and restaurants, weekend trips and binge shopping. Soon, she reached a stage where the last penny from her salary would be spent days before the next credit. She used her credit card to cover up the expenses for those days. But soon enough, she was getting huge credit card bills that would take away a chunk of her salary, leaving her in a chronic cycle of debt. Her parents, too, were not able to help her as they had little left after investing in her expensive

education.

Even with a fat salary, Nysa was unable to get out of the debt trap. At the same time, her childhood friend, Tanya, was not only planning her wedding but had also made the deposit on her new home.

But can this seemingly plausible future of your teenage child be reversed?

Well, yes, and that too, without much sweat!

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Let’s look at what different happened in Tanya’s life. Like Nysa, Tanya belonged to an educated, middle-class family with a similar economic background. Her parents, too, wished that Tanya gets the best of education, and subsequently, a well-paying job (an engineer in an IT company, Tanya lived in the same city as Nysa and earned almost same as her).

However, besides academics, Tanya’s parents also stressed on financial literacy. They often discussed their financial position with Tanya and rewarded her for avoiding unnecessary expenditures and best utilizing her pocket-money. Tanya learned to distinguish between her needs and wants at an early age, which enabled her to make informed financial decisions.

Tanya’s parents played the part of a life coach, a financial mentor and a guide in her life.

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When Tanya got to know about Nysa’s financial crisis, she took over the situation. To begin with, she convinced Nysa to move out of the expensive flat and move in with her. This saved a lot of money for Nysa.

Next, Tanya apportioned a budget for Nysa’s monthly expenses and asked her to stay away from impulsive online shopping. Within three months, Nysa’s finances were back on track.

Nysa sincerely thanked Tanya and asked her the secret behind living a financially independent life. Tanya told her what her parents had taught her when she was in school:

– Distinguish between Needs and Wants

– Invest before you spend

– Find a financial mentor

Tanya also told Nysa about investing in mutual funds through SIPs, where anyone can start investing from as low as Rs 500/- and benefit from the compounding effect and the volatile play of the market, provided the investment period is long (over ten years).

It turned out that Tanya’s parents started to invest a little sum in mutual funds when she was just fourteen. Over the years, her parents increased the SIP amount and later, after getting the job, Tanya contributed an even higher sum each month. As a result, her portfolio grew handsomely, giving her the freedom of having a second income.

To excel in academics or sports, we need a good teacher or coach. Similarly, to attain financial independence, students need a financial mentor. You could be the first financial mentor to your child, and teach them the basic tenets of financial discipline.

Stay tuned for the Tenth Money Mantra, the last in the series, to be featured in the next edition.
How did you like the story? Write to us at navemarg@gmail.com to share your thoughts.
Celso Fernandes, Goa’s financial doctor, can be reached at +91-9422058741.

By Dr. Celso Fernandes