This Children’s Day, I could have started saying “Pandit Nehru was born on 14 Nov. 1889 at Allahabad. He was fond of roses and children…hence this day is celebrated as Children’s day…!!”

I did not do that simply because his family will over do it….even today and the bill will be paid by us…

However, lets us see what we can teach our kids about money…

Given pushy parents and super pushy media, there is a lot of things we teach our kids. However one thing clear is with all this exam, vacation, exam, unit test, one thing is clear. Nobody is teaching your little darlings anything about money. While our children’s teachers share responsibility for teaching them to read and write, they won’t do much to help our children develop basic financial literacy skills. Beyond simple addition and subtraction, there just isn’t enough time in the school day to do it all.

So what’s a caring parent to do?

Take your child’s money-management education into your own hands, of course. Here’s how. It’s important to remember how your kids think when it comes to money. Most children are concrete thinkers who can demonstrate progressively organized and logical thought but have a limited ability to think abstractly. Preschool and elementary-aged kids will have trouble understanding abstract concepts like inflation, interest rates, and saving for a college education that is 12 years away.

However, when my year old daughter tells me the following things, I realize that she understands money:

Daughter: Dad, I need money to buy a gift for Mom

Self: Why don’t you use what is in your piggy bank?

Daughter: Dad, coins do not buy anything, I need notes!

At five, she understands that bread costs Rs 22, a car Rs 12 lakhs and a house Rs 100 lakhs. This is only because of constantly talking with her about money – unemotionally and factually. That’s why, when I told her that we couldn’t buy the five feet tall teddy bear because we don’t have enough money, she was worried that we wouldn’t be able to buy bread. To her, ‘no money’ meant, quite literally, that our pockets were empty.

I should have said, ‘We choose not to spend money on that so we have enough money for other things we need to buy.’ Understanding the way your child thinks is the key to providing him or her with a quality education in money management.

Here are some ways to help your literal thinker learn about money:

1. Piggy bank:

Buy your preschooler, a piggy bank and give her a stack of coins to put in it. Ask your child to sort the coins in a variety of different ways – shiny versus dull, big versus little. Know that he or she won’t understand for some years that a rupee saved today can be better than a rupee saved when she is 30 years old, they should get a touch and feel of money. I make my daughter pay money at the shop so that she understands the difference between coins, a small note and a big note.

2. Pocket money

For older children, establish an allowance so he or she can begin to make independent money decisions. Some folks will advocate linking the allowance to certain chores; I prefer establishing the basic chores (e.g., making the bed, cleaning their own room, and setting the table) as something each person does because they are a part of a family and it is their job. Be very careful that they do not become too money minded and keep asking, “How much will I get for looking after granny when she is unwell?” However, giving your child ‘extra’ tasks (like washing your car) for which he or she can earn money can teach her the satisfaction that comes from working for a goal. Your child will also understand that the more work that’s done, the more money he or she earns – a valuable life lesson. It also helps – my daughter gets Rs. 50 per month for generally being good, doing some non core work, etc. so when we go to a shop and she sees something which I will not buy, she translates and says “I will have to wait for 11 months to buy this”. T

Also telling them ‘saying your slokas regularly for 20 days non stop will earn you a new game’ is not about bribing, but about negotiating and finding what your kid wants. For example if she is willing to say her tables loud and clear for 30 days without a break, and you agree to pay her Rs. 40 for every day of good performance, you can allow her a discretionary Rs. 1200 next you go shopping. Of course it might include rules like ‘you cannot buy another teddy or Barbie, but you can see them valuing things.

All this is very, very useful later on in knowing the difference between “price” and “value”.



3. Value inculcation

One friend has done a brilliant ‘value inculcation’ in his son. He gives his son 50 coins of Rs 5 each. The kid needs one coin every day at the recess. So, 22 of them are precious. He has only 28 to spare every month. Now when the kid says he wants a new tennis racket or new tennis shoes, my friend quotes a price of say ‘50 coins’, it takes his son about three months to accumulate the same. And he treats each Rs 5 coin with far greater care than a 500 note. And it teaches him the value of delayed gratification. A good way to control the Y gen.

4. Introduce financial jargon

Get your older children to understand words like saving, investing, donating, pension, financial goal setting – they will thank you in the future.

5. Bank account

Opening a savings account, touring a bank vault, using the rupee-counting machine, comparing prices, and paying for items and receiving change are a few everyday ways to learn about money. My daughter was so happy that she opened the bank cover – and quoted the “pin” number. What she was actually reading was the pin code on the cover! But that is a teaching opportunity for me!

6. Summer jobs

Encourage your child when he or she tries entrepreneurial ventures like buying crackers in the wholesale and selling in retail, baby-sitting for the neighbors, or starting a dog-walking service. There’s no substitute for learning on the job. I grew up in a Gujarati locality – where everybody had a business, so finding my daughter a summer job will be easy for me. However it is not very difficult if you are not fussy.

7. Lead by example

Last, but not least, be mindful of how you talk about money. Do you complain about bills, fret about money, and always use negative terms about finances? Don’t be surprised, then, if your kids feel negatively, too. I have heard about a father who has 2 houses in the same building – they stay in one and have rented out the other. The father kept saying ‘what will happen if our building crashes – I will lose both the flats’, another father who kept saying ‘psu jobs are the best…and they are secure’. Sadly that man’s attitude is also passed on in toto to the son and the daughter. The man who was in a PSU has retired 4 years ago and is still awaiting his provident fund – I believe the union is holding it up!!

If you need some financial refreshing of your own, make full use of your this blog. I hope to fill it with right financial gyan – without forcing you to buy anything. Getting yourself on the right financial track is the best lesson of all for your kids. So, parents, remember that some lessons still start in the home. Managing money wisely is one of them.

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  1. interestingly, i have posted in the past & comment shows up immediately. in this case, i had posted a comment with a link (which seems to be the ‘inspiration’ for this) – that went into moderation blackhole…

  2. Play Business/Vyapaar with limited money with them (i.e. don’t distribute all the cash at the beginning, distribute only as much as about 10 properties they can buy). They will quickly learn almost everything (except compound interest) by playing that.

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