The focus of teaching about
money to children should revolve around concepts of:
should be explained the concept of earning very simply.
Earning means money that a person gets for rendering
some services or products. For eg: your 7- year old
daughter may like her friend's doll and wishes to
exchange it with hers. If she does that, it is called
barter. But if you promise her that she will get Rs.500
if she comes 1st in the school painting competition
and she does, she has earned that money. The prize
that you give her is in lieu of the happiness that
she gave you by excelling at school activities.
earn some amount of money, it creates a sense of pride
& respect in them. They not only understand the
value of money but also start appreciating that every
good thing requires effort. So, if they have 3 free
hours in a day and have the option of watching TV,
playing games or sleeping, they may make the choice
through which they hope to earn maximum money.
of earning also created a sense of healthy competition
among children. As a child, my grandfather used to
reward my brother & me everyday for the positive
remarks that our teachers used to give on our homework.
Rupee 1 for a 'good', Rs.2 for a 'Very good' and Rs.5
for an ' excellent' remark. Similarly, Rs.1 was deducted
for ' average' and Rs.2 for ' poor' remark. Soon,
both of us were striving to earn as much money as
possible and out-do each other. This led us to spend
more time on our homework and ensure that it was perfect;
sometimes even at the cost of sacrificing our playtime.
It also in some way explained to us the concept of
money and its value!
can use the money that they earn to buy things that
they like. This way, they can be introduced to spending.
The incentive given to children is simple. All the
money that they earn by coming 1st in class/sports
or for keeping the room clean or drinking milk in
the morning can be used by the child to buy his/her
favorite toys which otherwise are not readily accessible.
the concept of spending must be dealt in a careful
way. Children must learn how to spend wisely. This
means that even though they have some money at their
disposal to spend as they want, they still must make
choices since the amount of money is limited. Parents
should provide controlled freedom to children in this
matter. For eg: your child may have Rs. 300 earned
and would like to spend them buying chocolates. However,
that is a complete waste of money and is not even
healthy for the child's teeth. Here, as parents you
must intervene and explain ' spending wisely' to the
child. He/she should be cajoled into using the money
to buy that 'special game' that he/she had been eyeing
closely for the last two months.
explaining the concept of 'spending wisely', children
should also be introduced to the differences between
wants, desires & needs. The child may desire a
Sony Play station at the age of five and may want
a dollhouse but the need of the child may be to have
a new special bed. In such a case, although difficult,
parents need to explain how they cannot afford to
buy all the three things for the child at the same
time since money is limited. They also need to explain
how the Sony Play Station is beyond means at present
and how the bed is most important. They should convince
the child that they will buy the bed immediately and
how that will be a great show-off thing for the child
for his/her friends. They can link the purchase of
the dollhouse & the Play station to some achievements
of the child in due course of time.
must be introduced to the concept of saving very early.
Saving means keeping aside some amount of money earned
at present for future use. Parents should be gift
a 'piggy bank' to their children and encourage them
to put money in the piggy bank whenever they get some
money. This way of collection of money will help children
learn about saving in a passive way. Parents can even
create a goal in the child's mind for the amount of
money collected and if the child manages to collect
that much amount, parents promise to contribute the
same amount of sum to the piggy bank. Hence the money
will double up and will work as a great incentive
for the child. This money can in turn be used to buy
a gift for the child.
of saving goes hand-in-hand with the concept of spending
in a planned manner. Rather than giving adhoc sum
of amounts to children for their random expense like
candies, ice-cream at school, parents should give
a fixed amount of money for a week or a month and
inform the child that this money needs to be spent
over the fixed period of time. And in case, the child
finishes his/her allocated amount of money earlier,
then he/she will have to stay without money for the
remaining period of time. This planning will lead
to responsible expenditure by the child and the child
will not end up spending the entire sum of money is
the 1st few days. Most likely, such planned spending
will induce some savings.
should always encourage & praise children's' efforts
of saving. For eg: if your son wants to gift his younger
sister a small cake on her birthday, you should encourage
him to collect money for the same rather than financing
it from your side. This is a two-fold benefit: one,
it will give your son a goal to save for and second,
it will be a matter of great affection and pride for
the siblings and you as parents when your son gives
the birthday cake to his sister from ' his own money'!
teaching children about money, they must be made to
understand the negative habits of money namely borrowing.
Borrowing is just the opposite of saving - taking
others money to spend for one's own use right now
and repay the other person later.
must be explained how 'bad' borrowing is. For eg:
your son likes his friends' water bottle and borrows
it from him. Parents must then explain to him that
by borrowing someone else's bottle, he has taken an
obligation from the other child and he will need to
repay the same in some manner in the future. It is
possible that in future, our son has a very nice toy
and this friend asks for it; in which case he will
not be able to deny, having earlier borrowed his water
bottle. Children must be dissuaded from borrowing
anything from anyone.
be done only when parents instill confidence in their
children that they can fulfill all their children's
desires and their children can openly discuss their
needs with parents. Encouraging open discussion on
monetary matters with children will ensure that children
do not borrow from external people to fulfill their
should also explain to children that borrowing of
objects or money always needs to be given back to
the real owner. Hence, children should always save
some amount of money that they earn for any urgent
need later on. If they do not save regularly, then
in times of urgent need, they will have to borrow
money from others.
day & age of remote Banking & spending on
plastic rather than cash, often parents get into an
overdrive of explaining modern concepts to children.
However, in the formative years of 6 - 10 , children
should be introduced to the basic concepts of money
and principles. They need to first start appreciating
what money is, how it can be earned, why it should
be saved, how money should be spent wisely, etc. Only
then should they be introduced to the new formats
of money - credit & debit cards and access channels
of ATM, phone & Internet banking. Parents who
introduce their children to credit cards without inculcating
the value of saving in them run the risk of children
growing up as financially irresponsible adults. Similarly,
unless children understand the concept of 'brick n
mortar' bank, explaining remote channel banking will
lead to incomplete education.