Leaving a financial and parenting legacy

BEING a parent is a challenging job. It's a job that requires lifelong commitment, and you cannot resign from it even if you feel you can't cope. And what's more, parenting requires skills that are not obtainable from school, college or university. Parenting and managing money are the two most important skills that we learn from our parents or adults with whom we grew up, be they our grandparents, nannies or guardians.

As you go through the process of considering how to communicate with your parents and siblings about managing family wealth, you will realise the need to teach your children about money so that you are able to leave your own legacy behind for your children to communicate and manage money harmoniously as a family.

There is really not one proven or standard method of parenting and teaching children about money because of different personalities, behaviours and attitudes. We teach children about money based on how we were taught about money by our own parents or guardians, and from the environment in which we were brought up. Recall your childhood days, and how your parents taught you about money. Were you taught to save your pocket money or to spend it wisely?

Think about the environment you grew up in. Were there times when your parents had money problems and you often heard them argue about it? Or did your parents hide the fact that money was hard to come by in the family? Or were you pampered by your parents with toys, clothes and going out for fun activities and holidays?

Some parents have told me that because of the poverty they experienced during their own childhood, they now try their best to give their children a better life by lavishing them with the material goods and experiences that they themselves never had. By indulging their children, they are not allowing their children to experience financial responsibility.

Different parenting styles

While most parents learn parenting skills from their own parents or by observing others, they will accept some practices and discard others. Effective parenting requires interpersonal skills that can create some emotional demands. Experts in early childhood development say an important dimension of parenting is the style parents adopt when they interact with their children. According to Maccoby and Martin's parenting style typologies, there are four different parenting styles. Depending on the child's character, different parenting styles lead to different results:

1) Authoritarian parenting is a restrictive, punitive style in which parents exhort the child to follow their directions. The authoritative parent places firm limits and controls on the child, and allows little verbal exchange. These parents tend to be very strict and may control the children by limiting their wants and desired wants. In this case, the children may either grow up to rebel' by spending beyond their financial means to fulfil their childhood desires, or they may become very good at managing their money.

2) Nurturing parenting is a style that encourages the child to be independent but still places limits and controls on the child's actions. Extensive verbal give-and-take is allowed, and parents are warm and nurturing towards children. These parents often communicate and teach their children to spend their money wisely by explaining to them the importance of money.

3) Neglectful parenting is a style in which parents are uninvolved in the child's life. Children whose parents are neglectful often develop a sense that other aspects of their parents' lives are more important than they are. Children who grow up in this environment are often deprived of parental love and a sense of belonging in the family. As a result, they may grow up spending lots of money to fulfil their need for love from friends, and from their life partner. Or they may spend money to boost their self-esteem because of the lack of parental love.

4) Indulgent parenting is a style in which parents place few demands or controls on the children. These indulgent parents will let their children do what they want. Children with indulgent parents may often be spoilt by a variety of material things or an impressive lifestyle. The spending behaviour of indulgent parents may condition the children to spend more than they need or more than they can afford when they grow up.

Imagine a situation where the father is indulgent towards a child and provides gifts, toys, fun and pleasure, while the mother, on the other hand, is a disciplinarian with strict rules about gifts, toys, fun and pleasure. Who will the child prefer to be with, and who will the child learn more from? You and your spouse should decide on a best way to handle your children's money expectations. It is important to be consistent and fair to lessen potential family strife.

Communication

According to experts of child psychology, even from a tender age of 2 or 3 years old, a child learns by observation, and from conversations and experiences they have with adults. Hence, effective parenting warrants a tremendous amount of proper learning methods and communication skills. Understandably, today's parents are faced with more issues compared with their parents; the fact that today's younger generation is growing up in an era of media influence, technology advancement and the Internet makes parenting an even more challenging job.

It can be painful for parents to discipline and teach children about saving money, particularly when their children are easily influenced by their friends even as pre-schoolers. This is further compounded by the barrage of advertisements on television and online media that tempts your children with attractive toys, pretty clothes and accessories.

It does not really matter how much money you have or how much joy you derive from showering your children with material things. As parents, you have got to show some restraint and boundary. You don't have to feel guilty about scaling back on spending for your children. Your children may already have more than they need more clothes and shoes than they can wear, toys and games than they have time to play with.

Be mindful that while you are conscious of good money habits for your children, you need to ensure that your children's grandparents, godparents, aunties, uncles, or other adults around them do not indulge them too much with gifts. This may send your children the message that if they cannot get what they want from you, they can get it from them.

Family values 

In some situations, a couple may bring different views and values about money and parenting to the marriage. Because of personality, character, family and life experience differences, couples do face conflicting personal and family issues where money is concerned. Therefore, teaching a child about money really begins with teaching your child about the importance and meaning of life values as a family.

Honesty, integrity, teamwork, helpfulness, trust, love, family support, accountability, unity, filial piety, commitment, communication, sharing, spending time with parents and siblings are some of the most important family values that your children ought to know, even if they may be younger than six years old.

Constant messages to your children about how good family values are important in life, and that money cannot buy such values, are more important than parental love expressed in the form of material things for your children.

Teaching them important life values and let them know that money is a means to an end, and not for self-gratification.

Other than sending them to school to gain knowledge and social skills, the money skills that you teach your children from an early age are the most important life education you can provide them with and it actually starts at home. It is as simple as how you and your spouse manage money and communicate about money at home. Your good money skills will rub off on your children.

May this be your new resolutions for teaching your children good money sense!

MONEY & YOU By CAROL YIP

Carol Yip, founder of Abacus For Money, believes that if people understand their money mindset, behaviours and money psychology, they can be financially happy and successful. She actively promotes financial literacy and intelligence within families and for women, youths and retirees.

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Malaysian banks optimise depposit rates and lending

PETALING JAYA: Competition for fixed deposits (FDs) is set to continue as banks eye new liquidity by offering better interest rates to depositors following the postponement of the Basel III liquidity requirement rules. Industry analysts said banks would also likely optimise their lending ability moving forward.

Ambrose: ‘Malaysia has a well-functioning banking system while Europe does not and the US barely does.’

“It's not good to be too conservative in lending. It is important for the overall economic wellbeing of the country and it gives life to businesses, bringing prosperity to the country,” said a banking analyst from one of the four largest local banks by asset size.

According to Gerald Ambrose, the managing director of fund management company Aberdeen Asset Management Sdn Bhd, the stricter Basel III requirements to ensure banks are well capitalised may not be too suitable for Malaysia which presently has a well-functioning banking system.

“Malaysia has a well-functioning banking system while Europe does not and the US barely does. I think capital requirements that are too strict may potentially stifle economic activities,” Ambrose told StarBiz over the telephone recently.

Commenting on recent banking statistics, RHB Research in a recent note said the November 2012 system statistics showed loans growth had eased to 11.2% year-on-year (y-o-y) from 11.8% y-o-y growth in October 2012.

“The slower pace of growth was attributed to higher repayments during the month, partly mitigated by stronger disbursements. Meanwhile, household loans continued to expand at a steady pace of 11.6% yoy,” RHB Research analyst David Chong said in the report.

Chong noted Nov 2012's total system deposits grew 11.3% yoy with this growth being broad based' with loans to deposit ratio unchanged month-on-month (m-o-m) at 81.6%, the system core capital ratio was at 13.4% and risk-weighted capital ratio stood unchanged m-o-m at 15.3%.

According to Alliance Research banking analyst Cheah King Yoong, these statistics showed the domestic banking system remained “well capitalised” and “resilient to withstand unanticipated shocks to the financial system, if any.”

Cheah added that lending activities did not pick up towards the end of 2012 which could be due to both lenders and borrowers turning cautious with the impending general election which is widely expected to be held in March.

“We reiterate that there could be two potential de-rating catalysts, which pose downside risks to our 7-9% loan growth forecasts for 2013.

“These are (that) lending activities could decelerate in the first quarter of 2013 with slowing corporate loan disbursements and consumers turning cautious pending the upcoming general election,” Cheah said.

“Post-election, should the federal government implement (the) goods and services tax, resume its subsidies rationalisation programme and raise the electricity tariff to close its budget deficit; these fiscal tightening policies could have an adverse impact on consumer spending and consumer loans in the later part of 2013,” he added

By DANIEL KHOO danielkhoo@thestar.com.my

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IBM on solid ground

IBM, the world’s largest technology services company, reported fourth-quarter earnings and revenue that beat estimates on the back of growth in emerging markets.

It gave a better-than-expected 2013 outlook after a solid fourth quarter that analysts say has more to do with Big Blue's smooth execution than a vibrant tech spending environment.

Companies had been widely expected to hold back on IT purchases in December in part because of worries about the so-called US fiscal cliff.

Automatic tax increases and spending cuts would have been triggered had Congress not made a deal to avert the cliff and could have pushed the weak US economy into recession.

But IBM said on Tuesday that its quarterly results beat forecasts and it planned to achieve earnings of at least US$16.70 a share for the full year, above analysts' consensus forecast of US$16.57.
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While some analysts said IBM's earnings might be a sign of an improved tech spending environment, others said the strong results were specific to IBM's business model.

“IBM is better positioned in a tough environment than most tech companies are,” said Cindy Shaw, managing director at Discern.

IBM made a bold strategic move a decade ago when it bought PriceWaterhouse's consulting business and then decided to exit the PC business, betting its future was in finding solutions to business problems with the help of software and technology.

That strategy appears to have paid off.

“What IBM does better than anyone, with the exception of Accenture, is solving problems and I am not talking about taking out some costs, but really driving revenue,” Shaw said.

In addition, she said, IBM was strong in “hot growth markets” such as data analytics, cloud computing, emerging markets and what IBM calls smarter planet, which aims to improve areas such as traffic, power grids and food production.

Sterne Agee analyst Shaw Wu agreed, saying the success appeared to be more specific to IBM than the industry in general.

“The results show that the IBM advantage and business model vertical integration of hardware and software is difficult to replicate,” he said.

“IBM has been doing this the longest and customers are very accustomed to it. They have a much stronger offering and brand name.”

As a result quarterly net income rose 10% to US$6.1bil, or US$5.39 a share from US$4.71 a year earlier. Revenue dropped 1% to US$29.3bil due to the sale of its retail business in the third quarter.

Analysts had expected the Armonk, New York-based company to report net income of US$5.95bil, or US$5.25 a share, on revenue of US$29.05bil, according to Thomson Reuters I/B/E/S.

Revenue grew in particular because of an 11% increase in IBM's growth markets in Brazil, India, Russia and China.

Software revenue was up 3% in the quarter. Reuters

Some analysts said IBM's better than expected results were a sign that tech spending might not have been as bleak as expected.

”It is better than what people had feared,” said Brian Marshall, an analyst at ISI Group.

”Virtually every segment did a little bit better than people expected. It supports the fact that things are getting better out there at least from a tech industry standpoint.”

Andrew Bartels, an analyst with research firm Forrester Research, said: “We were expecting a lot of companies were sitting on their wallets until it became clear what was going to become of the fiscal cliff.

”Given the fact it's Q4 with a cloud of the fiscal cliff, it's a positive indication that tech software will be doing better in the next couple of months.”

IBM shares rose more than 4 percent to $204.50 after closing at $196.08 on the New York Stock Exchange.- Reuters  

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Is there ethics in politics?

DR Mohd Farid Mohd Shahran of Ikim in “When the world of politics is devoid of ethics” (The Star Jan 22 - See the attachment) believes there is still room for ethics in politics.

In the real world, especially in developing countries, the ethics of Plato and al-Farabi are only good for an utopian society.

While man is not born power crazy, those who enter politics are goaded by power to resort to unethical means.

Morality is hard to preserve and practise in politics.

English philosopher Francis Bacon said: “It is hard and severe a thing to be a true politician as to be truly moral.”

Unethical behaviour seems to be the order of the day as the general election looms near.

Almost everyday we read of mudslinging on both sides of the fence. Everything under the sun is being politicised as the stakes are very high.

French philosopher Voltaire remarked: “The pleasure of governing must certainly be exquisite if we may judge from the vast numbers who are eager to be concerned with it.”

Had Voltaire been alive today, he would qualify his statement by saying, “It is not so much the pleasure of governing, but the power that comes with it, making the vast numbers who are eager to be concerned with it.”

As Dr Farid said: “Politics, in its true meaning, is praiseworthy”. But the “realpolitik” meaning is different. Mao Zedong once said: “Power comes from the barrel of the gun”.

Jonathan Swift said: “Politics as the word is understood, is nothing but corruption.”

Despite the negative connotation of politics in its general form, politics as a profession can have high ethical values if the very system in which politics arise have strong values as seen in most developed countries.

Singapore is a shining example where the ruling party has great difficulty finding candidates to stand for elections as the people do not see it as a way to become rich overnight.

Singaporean politicians are known to observe and practice the highest ethical principles as espoused by Plato.

The observance of ethical political principles in Malaysia still has a long way to go as noted by Dr Farid where “small issues can potentially be magnified into a big scandal.”

“The various issues raised by political parties range from major ones such as fair economic distribution and political justice, to the most trivial or personal matters such as the way leaders and their family members dress”.

So far, general elections in Malaysia, unlike in some developing countries, have not resulted in the use of heavy weapons to gun down people.

And when the election results are announced, people accept it in good faith and continue with their daily chores while waiting for the next general election. Meanwhile, they hope the party that won will honour its manifesto.

One of America’s founding father’s Thomas Jefferson said: “I have no ambition to govern men. It is a painful and thankless office.” Thomas Jefferson was a man of high ethical values.

Do we have men like Jefferson in Malaysian politics?

Certainly there are many men and they should be given the task of providing true leadership along the political principles of Plato and al-Farabi.

By HASSAN TALIB

When the world of politics is devoid of ethics

 

Much too often, personalities are the biggest casualties as they are ruthlessly tarnished. All the dirt and grime is dug out and paraded for the nation to see despite their many prior good contributions.

WITH the general election around the corner, the heat of the Malaysian political climate is gradually increasing.

The number of political gatherings, ceramah and demonstrations by political parties multiply by the day and continue to increase.

The various issues raised by political parties range from major ones such as fair economic distribution and political justice, to the most trivial or personal matters such as the way leaders and their family members dress.

It looks as if Malaysians have become a very conscious lot concerned over everything overnight. Small issues can potentially be magnified into a big scandal.

Not only is the intensity palpable within ceramah and gatherings, a similar tone is also evident in cyberspace where heated debates and exchange of views have overwhelmed the social media such as blogs, Facebook and Twitter.

While such a phenomenon is regarded as normal, the negative culture attached to it is best eschewed.

To render support for one’s own party, some leaders and fanatical followers would resort to unethical means such as making false claims and unfounded allegations that include character assassination.

In response to such accusations, the opposing parties will stage similar counter attacks. As a result, emotions simply overrule reason causing the situation to get out of hand.

Understandably, the principle that guides extreme political groups is that politics is a war in which all kinds of weapons must be deployed to exterminate the enemies.

In engaging power politics, the prince, says Machiavelli, must be “adaptable and know how to do wrong when he must”.

Naturally, such an approach will have a more divisive impact on society.

People become more divided and emotions override everything else, particularly level-headedness.

Much too often, personalities are the biggest casualties as they are ruthlessly tarnished. All the dirt and grime is dug out and paraded for the nation to see despite their many prior good contributions.

Thus, questions remain: Is this the way politics serve its purpose in administering human life? Must society undergo this unhealthy process to elect a leader? Must we necessarily be divisive before arriving at political maturity when the amount of damage done is irreparable?

The answer lies in how the meaning of politics should be properly understood.

More importantly is the understanding of the role of ethics in political activities.

Politics, in its true meaning, is praiseworthy.

Philosophers and political thinkers as early as Plato, through his idea of the “Philosopher King”, had proposed a political system where wisdom and virtues must be the bases of governing states.

Although his idea is also criticised as utopian, the principle that Plato tried to put forward is very important, that is, a true political system must be guided by knowledge and virtue reflected primarily in the character of the leaders and politicians.

In other words, ethics, according to Plato, must be the basis of politics.

Just as men must live virtuous and good lives, a state must also be built on strong ethical ground. If the state is unfavourable, says Plato, the individual citizens would find themselves unable to lead a good life as it should be lived.

This organic relationship between ethics and politics from Plato stemmed from his idea that a state must be a microcosmic reflection of man. Since a state is run by humans who need to be furnished with good ethical virtues for him to be good, a good state must also be refined with virtuous characteristics.

Echoing Plato is al-Farabi, a celebrated thinker from the Muslim tradition whose work, The Opinions of Inhabitants of the Virtuous City, underlines that a state should be properly ruled by virtuous leaders and followed by virtuous people.

“The excellent city resembles the perfect and healthy body where all of whose limbs co-operate to make the life of the animal perfect and to preserve it in this state.”

Among the qualities needed by a ruler, according to al-Farabi, are intelligence, good memory, keenness of mind, love of knowledge, moderation in matters of food, drink and sex, love of truthfulness, magnanimity, frugality, love of justice, firmness and courage.

Arguably for some, real politics can never take ethics as its principle.

Such a view is justified if only man is naturally born with the attribute of being power crazed.

However, this has not been so since man was created by God in the best of mould as affirmed in the Quran: “Verily we have created the human being in the best of form.”

Furthermore, mankind can take pride in some of its leaders and rulers with good qualities and virtuous characteristics decorating its history. In Islam, for example, Prophet Muhammad and the four-guided caliphs continue to be revered as leaders par excellence for all Muslims. Another outstanding and exemplary leader at a later period was Umar Abd Aziz whose short rule, nevertheless, left a tremendous impact.

So rigid was Umar’s standard of ethics that he was said to have even refused to use up the candle in his office to light the room when discussing personal matters.

In sum, while we all can agree and understand Einstein when he said, “Politics is more difficult than physics”, we hope that, just as physics has contributed immensely to benefit the life of the human kind, politics would be able to do likewise.

BY DR MOHD FARID MOHD SHAHRAN, SENIOR FELLOW CENTRE OF ECONOMICS AND SOCIAL SCIENCE 
IKIM VIEWS - The Star Jan 22, 2012

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Chance to invest in distressed assets

Distressed property markets where deals are difficult to finance and yield spreads are at all-time highs provide attractive investment opportunities, according to Morgan Stanley’s real estate unit.

In the Asia-Pacific region, Morgan Stanley Real Estate Investing is most focused on China, India, Australia and Japan, said Olivier de Poulpiquet, who helps oversee $36 billion in real estate assets as the global co-head for the unit.

In India and China, demand is driven by strong demographic trends amid a dearth of financing, while in Australia and Japan, low borrowing costs are providing opportunities, he said.

Morgan Stanley, with a team of 280 globally in 11 countries dedicated to the property business, has about 45 percent of its investments in the U.S., 33 percent in Asia and about 22 percent in Europe.

In many developed markets, such as U.S., Japan and Australia, the yield spread between real estate and the risk free rate, typically the interest rate on U.S. Treasury bills, is as much as 400 basis points, de Poulpiquet said.

“Asia and the U.S. will continue to offer opportunities,” de Poulpiquet said in an interview in Singapore yesterday. “Investments in real estate have seen a flight to safety globally and in particular in the U.S. and Europe.”

Interest in property investments by institutional investors is improving as the asset class is viewed as an effective portfolio diversifier and an inflation hedge, de Poulpiquet said. Allocations to real estate by major institutions may climb from an average of 7 percent currently to 10 percent, he said, without providing a time frame for the increase.

India, China

In India and China, Morgan Stanley is finding opportunities by financing developers that are seeking money to complete projects amid a scarcity of capital, de Poulpiquet said.

In its almost three-year effort to tighten the property market, the Chinese government has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, and enacted home-purchase restrictions in about 40 cities. India’s biggest developers have struggled to rein in record debt as they grapple with high borrowing costs, dwindling sales and banks’ reluctance to lend.

“The major trend in these markets is that this growth is combined with a capital constrained environment for real estate, mostly driven by government interventions and price cooling measures,” de Poulpiquet said.

“In India and China, there is less opportunity to buy existing assets but greater opportunity to pick the right developer and build to either lease or sell.”

Favorable Demographics

India will have 127 million more working age adults by 2020, while in China, the 470 million adults leaving rural areas for cities will reach a rate of 11 million per year, said de Poulpiquet.

Over the next 15 years, the total global urban space growth will reach about 82,000 square kilometers (31,660 square miles), 47 percent of which will be driven by India and China, he said.

In markets such as Shanghai, the supply of class A office spaces is relatively low while demand is forecasted to remain robust, de Poulpiquet said. In India, the trend is similar where the residential sector continues to offer interesting opportunities, he said.

In Australia, distressed assets sold by European banks which are undergoing deleveraging processes to clean up their balance sheets are attractive, said de Poulpiquet.

In Japan, Morgan Stanley is buying class B office assets in Tokyo and greater Tokyo, he said.

“In many markets globally, including Japan and Australia you can buy class B plus assets, at significant yield differential between your cost of borrowing and the real estate yield,” said de Poulpiquet. “It is a relatively safer investment with good quality yield and return profile.”

Europe will also increasingly offer attractive investments in real estate with all the level of distress in the market, he said. Still, Morgan Stanley remains “cautious” and focused on making “defensive investments” in the region as prices still have some room to fall, he said.

“Overall, we will see slower growth, more volatility but in Europe, it’s neither a doomsday scenario nor in a happy recovery and this will last for a while,” he said.- Bloomberg

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