Three finance lessons for your child

Money skills are not taught in schools. However, they are essential for one’s growth. It is better to start educating kids at younger age.

Depending on their age kids make choices with money – whether to hang out on weekends at the local ice cream parlour, whether to go with brands or look at value. Before they take on their own financial responsibilities the skills of handling money ought to be provided to kids.

Unfortunately money skills are not part of formal school education. Many of us would have picked up some of our own financial lessons the hard way…through mistakes and corrections. That qualifies us to be a personal finance coach that the younger generation can look up to. Here is a guide to imparting essentials money to kids.


Make learning easy

From a young age children can be taught that money has purchasing power and that it needs to be earned. According to a study by a UK based advisory service, by the age of 7 years kids develop several basic concepts about money that will later broadly relate to personal finance. Some of these include the understanding that they need to pay for goods with an equivalent amount of money, the concept of earning and income.

So depending on their age and capacity you can introduce various aspects of finances. Opening a bank account for teenage kids can go a long way in helping them gain confidence and experience with handling money transactions. Many banks offer student account for school and college students. Teens can be taught how to use a debit card, and the “grown up” activities of write a cheque or DD.

Games are a nice way to engage the smaller kids. You would find many board games on money management such as Monopoly, Cashflow etc. and plenty of them are available online too.

Saving money in a piggybank

Three finance lessons for your child

i. Saving comes before spending

Kids may not have paychecks to save from but if they do have some kind of income they can be encouraged to save. Let them begin with whatever amount they can, even if it’s Rs 20 a week. The habit once formed is likely to stay with them, as some day they take on their own financial responsibilities.

You could incentivize them to drive home the virtue of saving by adding a rupee for every X amount of money they save. Another effective way is to make fun deals. Say they wish to have a camera for the next birthday. Agree to buy one for them after they have accumulated a small portion of the amount required for it. Your child would also better appreciate its value since she has earned it, in a sense.

ii. Avoiding the debt trap

One of the foundational keys to financial wellbeing is to learn to live within one’s means. You can talk to them about how debt could hurt one’s financial life and even ruin it, if in excess. Older kids can be educated on how credit card debt, personal loans can become a vicious trap.

Inculcating the savings habit discussed in the point above would go a long way in making them used to creating a corpus from which they use in the future and avoid debts.

iii. Inflation and investing

Although compared to our western counterparts many of us Indians are savers by tradition, only a minority seems to appreciate the importance of long term investing in growth assets, and even fewer people actually practice it. For many adults saving in a bank account is equivalent to investing! Teenage children can be introduced to the concept of inflation, how money loses value over time and the need for accumulated savings to outgrow inflation to help in meeting future goals.

Set a good example to follow

After all is said, one must carefully adhere to the good financial principles they’d like their child to follow. Your kids are likely to resemble you in their financial behaviour and orientation because like they say, children learn more by observing than by hearing.

By the time your child is ready to fly out of your nest he/she will have built solid foundations for his/her personal finance life.

Data Source: Bloomberg and Quantum AMC

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