FINANCIAL INDEPENDENCE: WHY ENABLING AGENCY AND ACCOUNTABILITY MATTER FOR WOMEN, PARENTS, AND DEPENDANTS

Some themes recur in this column. The idea of a unique money personality is one of them. Our attitudes towards money are shaped by too many factors to list here. We may think of our life’s experiences as the dominant one, but even this is tough to map straight-line connections. If we have grown up in a frugal household, our memories hold equal potential to make us either frugal adults or rebellious spendthrifts. We have seen repeating credit card defaults from people who we assume would have been shamed and scarred by earlier instances of failing to pay their dues; and we see those who cut up their credit cards and never use them after a default. The discussion I would like to open is this—what happens when one makes financial decisions for another, and why the agency or freedom to make decisions is critical in household personal finance.

Let me underline another recurring theme in this column to provide a framework. There are two important features of money that shape our attitude towards it. One, money is a limited resource for the majority of us. Two, alternative uses for money can always be found. We call this opportunity cost. We spend our personal finance journey figuring out how to work with these money features. We have to make choices about where to earn, spend, save, invest and give money. The choice we make precludes other choices because there is only a limited amount of money or ability to include all. The caution about choices and regret about what we chose are more common than carefree decision-making that fills us with pride. Therefore, the question of who makes these choices directly impacts the outcomes, and how we feel about them.

Personal financial preferences

Consider the instances where you make financial decisions for others in the family. Recall instances when others made decisions for you. Both situations would have caused some resentment, even if it was not discussed openly. We are not talking about common financial decisions, such as the school the children should attend, or the house one should buy, or the car the family drives. Consensus is tough in these cases too, but we tend to voice our views and feel alright as long as every major decision is made only by one person. Some households tolerate such dominance, but let’s set that aside as undesirable ab initio. At least striving for agreement is better than pure autocracy. We are talking about personal financial preferences and the space to express these. Do we have them in our households?

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Let me discuss two commonly occurring situations, where I believe denial prevails and we do not even see the need for agency. The first involves women who do not choose to work and contribute explicitly to the income of the household. Unfortunately, there is no market value placed on their services as caregivers and, therefore, the economic value of their contributions is not known or recognised. If the income is equally owned by both, do we have instances of the wife building assets and investments with the same authority and control that the husband does? Or does she stop at spending and camouflaging her spending decisions on gold as investments and assets? When we argue that all the money is hers too, do we stop that agency at spending decisions alone? Does she exploit that freedom to spend as she wishes while the husband resents it?

Why is it difficult to allocate an income to her and hold her responsible for her personal spending, while also enabling her growth as an investor who knows how to create assets? This challenge surfaces every time I am asked to talk to women about finance. Without the agency to build assets, and the understanding that spending must have ceilings and accountability, it is difficult to provide a context in which financial literacy is critical for women.

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Parental agency

The second situation is of the elderly parents. We live through fortunate times, when parents find that they have a decent pension income and accumulated assets, and children begin with a better economic situation than theirs, thanks to good quality education and opportunity. This creates an amicable situation, where adult children are willing to spend on parents and care for them. We know of parents flying business class to visit their children living abroad, and of parents receiving top quality medical and caregiving facilities funded by their children. Consider, however, the case of parents who do not have an independent income and do not own much except for the house they live in and some gold. How much agency do these parents have in the financial decisions made for their comfort? Would they have liked to swipe their cards to spend and give in the manner they like, rather than worry about their child’s approval? Would they have preferred a temple tour with friends over an expensive holiday with the grandkids?

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We do not know what they would do if they had the agency to decide how money was spent on them. Nor do we know if their children would have been better off if expectations were not so open-ended, and if spending had some ceilings that they could provide for.

Dependants’ decisions

I would like to place for discussion not just the question of freedom to decide, but also responsibility and accountability. Why don’t we provide a monthly allowance in cases where explicit incomes that enable agency are not present? Does it denigrate the ‘care’ and ‘love’ to rupee terms, which makes it uncomfortable? Where is the space for the money personality of the dependent individuals to make their own money decisions? Why is it acceptable for them to give it all up and remain financially illiterate even if they expect to be cared for?

What if we begin with a limit on how much is available to spend, and add to it the responsibility of spending and saving? Wouldn’t there be a natural tendency to learn to allocate, consider opportunity cost, take charge and also create long-term assets, instead of spending the allowance? Doesn’t every one of us have a money personality of our own? Shouldn’t it manifest at least in some of the decisions we make so we know, learn, grow and eventually thrive?

The Author is Chairperson, Centre For Investment Education and Learning