Savings is less about returns, more about habit: Why you must teach kids about money from young age (2024)

Do you know what ‘menu engineering’ means? I didn’t, till recently. I found out only after I was sent a social media post. It’s a subtle, yet pervasive, form of manipulation in a restaurant menu, which is structured in such a way that the guests are guided into ordering the most profitable items.

The layout and language of the menu are not primarily about design and aesthetics, but a carefully orchestrated deception. Highmargin items are strategically placed in spots where they are more likely to catch the eye, and are often accompanied by visual tricks designed to draw attention away from the less profitable choices. Pricing strategies, too, are a part of this manipulative toolbox. The absence of currency symbols and pricing items just below a whole number are not mere design choices, but psychological ploys to make spending seem less significant. However, there’s nothing about menu engineering that makes it a unique example of the hidden persuasiveness of modern marketing. It’s just an interesting variation on a common theme.

We live in an information environment, where almost every product either actively encourages you to spend more, or passively makes you aspire to buy and own more. If, as adults, you and I are prone to being seduced by this atmosphere, think of what it does to a child’s growing and developing mind. I could be wrong, but it’s clear that a conscious deferment of consumption, which lies at the heart of saving and investing, is much harder for today’s children and young people than it was earlier.

Almost two decades ago, I wrote that if you ask a child to choose between eating one ice cream immediately, or two ice creams a day later, he or she will invariably choose to have one right away. However, if you give the child a choice between having one ice cream the next day or two ice creams the day after that, almost all children will choose to wait the extra day and get two ice creams, instead of one. I think all parents know about this. I, too, figured this out almost as soon as my daughter was old enough to ask for things.

Has this changed? I suspect that it has. The problem is that most of us don’t teach children anything about money. I find that grown children, even teenagers, have no real idea about how money works. Not only do they not know about earnings, savings and investments, but they also have no idea about the flow of money in society. People get educated, acquire jobs and start earning money, yet they need to learn the essentials of personal finance.

Teaching children about these topics is also parents’ responsibility. What happens when you buy something? What exactly does a bank do with your money? How do taxes work? What are investments? How do investments grow? How is money created? Why does the value of investments increase with time,while that of a car or phone decreases? Why were prices of things low in the past? Why will these be higher in the future?

As parents, we tend to shield our children from thinking too much about money. This is a grave mistake. Spending on children is good, but teaching them about money should not be ignored. This is the most important thing about personal finance that many never realise. Saving is not about the arithmetic of returns or interest rates, but a way of thinking, a habit. Even if you think it is irrelevant, or even if you are prosperous enough to buy anything for your children, just get them to start saving. The returns are not important; it’s the act and habit of saving from a young age that is crucial. A person who saves even a small sum of `500 a month will be a different kind of person than the one who does not. Get your children to be that kind of person.

The Author is CEO, VALUE RESEARCH

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