The past year’s market turmoil has caused me to consider the manner in which I have learned to deal with money. The American desire for excessive consumption has left many individuals in dire circumstances, facing problems such as foreclosure and bankruptcy, and I can’t help but wonder about the root of their problems. In what follows, I will share my path to understanding money (albeit in my limited experience) and suggest some ways that parents can help their children become aware of the intricacies of personal finance.
Growing up as a second generation Indian-American, I have observed both “Indian” and “American” attitudes toward money. Although it’s difficult to generalize about these perspectives, my Indian mother is a very savvy saver, while many of my friends’ parents of other ethnic backgrounds seem to be a lot more interested in “living in the moment.”
I have also observed that Indian parents will often happily support education costs until their child has received a degree. We all know the stereotype that Indians prioritize education above all else—since education makes you competitive in the working world—and are willing to spend for it. In comparison, many Americans consider their children to be adults at 18, and I have several non-Indian peers who have to worry about college tuition costs. These friends are expected to make their own decisions, including financial ones, and live with the consequences of those choices.
I’m currently a senior at UC Berkeley, and I have earned some kind of income through summer jobs, internships, or investing almost consistently since the age of 16. This has allowed me to enjoy some of the finer things that a student my age rarely gets to enjoy (e.g. travel, electronics, nice clothes) on my own income. Recently, upon noticing the spending behaviors of my peers, I began to think about the way that Indian-Americans often think about money and how it has affected the lifestyles of my Indian-American college friends.
I am fortunate to have a parent who pays for my tuition and living costs, so I can focus my efforts on studying, doing well in school, taking part in extracurricular activities, and developing myself professionally so I am best-prepared for the “real-world.” Many Indian-American students even have the luxury of being able to move back home after graduation in order to save on rent and other basic living expenses. While this lifestyle may be perfectly common in India, Indian parents in the U.S. also carry on the tradition to make sure their children are educated, employed, and able to stand on their own feet. But what are these parents doing to prepare their children for the financial decisions they are going to have to make when on their own? My sense is that they are doing very little.
Almost all of my South Asian college friends have joint bank accounts with their parents, which the parents monitor and deposit money into as necessary. From the student’s perspective, he can spend however much, knowing it will be refilled when the account is low. Occasionally, parents limit the student to a budget of a certain amount per month, quarter, or semester to teach him budgeting skills. But, in my experience, even this is done relatively infrequently and rather indulgently.
I’m not saying that the children in question are spending ridiculous amounts of their parents’ money, but rather that the children are not learning how to deal with expenses on their own. Most college students are conscious of their financial dependency and will avoid activities which cost more of their parent’s money than they are comfortable spending.
So, as I ask my peers, why not separate some finances, earn and maintain your own money, with which you can do as you please?
When I turned 18, I opened my own checking and savings accounts. Prior to that, I had a pseudo-account with my mother where I kept track of my money on a spreadsheet. From the first time I started earning my own money, my mom told me that I could do whatever I wanted to with that money (granted it was legal, obviously). She would cover all necessary living expenses such as food, school books, clothes, rent, and tuition. But if I wanted new clothes or shoes before I “needed” them, I would have to pay for them on my own. Another rule she put into place was that I’d pay for my own gas expenses whenever I was employed full-time. Throughout high school and college, I’ve constantly had to think about my consumption decisions, thus preparing me for complete independence.
The main reason I have established my own funds is because I do not like asking for money or permission to do certain “non-essential” activities or buy “non-essential” items. I would feel wrong asking for money for a college vacation with friends, during which I inevitably spend money on alcohol and expensive food. Using my own money for such activities has not only taught me how to allocate funds for life’s expenses, but it has also removed the guilt as well as the dependence on family funds.
My friends and I often talk about taking trips or doing activities that could cost a decent amount of money. Some of them inevitably start complaining about their parents and how they won’t have permission to spend X amount of dollars on that particular activity or trip. My advice to these individuals is to get out there and do something about it! You can earn. You can set up and monitor your own bank account. You can make sacrifices, save money, and spend on those things you really want to do and enjoy.
While creating one’s own set of funds in high school or college may not be essential to becoming financially independent later in life, it helps a great deal in preparing for that eventuality. It might also create a new generation of individuals better prepared to make responsible financial decisions.
Tushar Kumar is a senior at the University of California, Berkeley. He will be starting a career in asset management and insurance sales in the fall at the Northwestern Mutual Financial Network in San Francisco, Calif.
Updated 2019: Tushar Kumar is a Partner at Twin Peak Wealth Advisors.