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Age-wise guide to teaching kids the value of money

Money is one of the best teachers. It can provide you with all the luxury in the world or make you a beggar on the street. It takes years and years of effort and experience to understand the concept of saving, spending and investing money the right way. In spite of having a good amount of life experience, we can fail terribly in financial matters. To help your child grow up with financial literacy, here is a guide.

Ages 2 to 3 years – Introducing simple financial concepts

- Money Box/Piggy Bank: Offer a transparent piggy bank than the opaque one. As your child keeps adding money to this bank and the box visibly fills up, they will have a sense of accomplishment.

- Be a role model: Kids are bound to follow their parents. When you save the money, your child observes you and does the same. If you overspend, your child inevitably does the same. As your child’s biggest role model, set the examples you want your child to live by.

- Coin Identification Game: This is a fun way to teach your child new things. Introduce various currency coins to your child. Teach the worth of every coin. Help them master the skill of coin identification by playing the game with them.

- Teach the importance of money: Give your child a ten rupee note, with instructions to pick whatever he likes within that limit, and no more. Let them pay for the purchases they make. Everything costs money and your child should learn this.

- Teach delayed gratification: Teach your child to be patient and wait for bigger payoffs rather than immediate or instant gratification. Give them the option of waiting until the next day to get two cookies at a time, rather than only one cookie today and none tomorrow.

Ages 4 to 5 years – Doing the Math behind Money

- Teach your child simple math concepts like counting and calculating money.

- The concept of saving: Let your child know it is not about spending all the time. It is also important to save before you spend.

- Discount coupons: Teach your child simple concepts of addition and subtraction. Offer discount coupons and let them understand and subtract the discount amount before they spend the coupon.

- The art of waiting: Explain to your child that there is a difference between wants and needs. Also, make your child wait before they can buy something they want.


Ages 6 to 8 years – Your Child’s Allowance

- The concept of Pocket money: Instead of giving your child pocket money on a weekly basis, make your child do simple chores such as gardening or cleaning up the house to teach them about 'earning’ weekly allowances.

- Saving and spending wisely: Have a conversation with your child regarding this. Ask him to self-evaluate his savings and expenditure. Appreciate him when he saves and spends the money wisely.

- Importance of giving back: It is absolutely necessary to teach your child the importance of giving back to the community in the form of charity. Ask your child to keep aside a certain amount for a social cause.

- Build a positive attitude: Your child surely has dreams of his own future. Talk about it with him. Discuss the careers and their scope and along with that, let your child know everyone works to earn money. Motivate him to work and earn. But also let them know that money is not everything, and that he should ideally pick a job based on what he likes to do.

- If your child wants something, ask him to figure out how much it will cost and save up for it. Also, teach him the concept of comparing the prices and prioritising the needs over the wants.


Age 9 to 12 years - Instil saving habits

- Savings account: Open a bank account for your child, and let them spend the money they save to buy something they really want. This gives a feeling of ownership and responsibility.

- Introduce cards: Let your child know about different type of cards and their functions based on bank accounts, how to use them, and about using them safely. Also teach the importance of paying back the amount in full and on time.

- Give an overview how banks pay interest on savings and encourage them also to save money for their future.

Age 13-16 years: Teaching value of money

- Budgeting: Ask your child to make a list of his expenses and find ways to compromise on the unnecessary spending in order to save. This is called budgeting.

- Rewards: Since your child is well aware of earning money by doing their chores and jobs now, teach your child to earn rewards by doing extra work or bigger jobs.

- Investments: Earning money is not only through the interest from savings in the bank. You can teach your child about the stock market and about investing in stocks of companies and understanding how it fluctuates.

Make sure, however, that your child does not excessively worry or think about money. Money is a resource, and while it is definitely something you should use wisely and save up, it is not the center of your child’s life, and they need to put their happiness and hobbies before it.  

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