Money makes the world go round. And it’s so true in the present times. Understanding the value of money, not just its market value but its importance in our lives is something we can’t ignore. Most of us have learnt about the nitty-gritty of managing our finances the hard way, kind of like the on-job training once we started earning. All the more reason why we should make sure we pass on our experience. There are 13 ways to make your child financial literate. It’s never too early nor they too young to understand this important lesson of life.
Most parents find it uncomfortable to talk about money or finance with their kids. “It’s not for them”, is the common response. But I beg to differ. The earlier we start to teach our kids about managing finances, the better. Schools should include lessons to inculcate financial literacy.

Financial literacy doesn’t mean sharing the house budget or the details of your salary slip or asking them to dabble in the share market. It means teaching them about the value of money, about managing small amounts like their allowances and encouraging good, healthy financial habits.
There are several benefits of imparting financial knowledge to children. It encourages high-level thinking, makes them understand the value of money and in turn learn to work for it, develops self-esteem and prepares them for their adult life. Planning teaches them to think ahead and be independent instead of being dependent on others.
Learning about practical applications gives them lessons for the future. When they lack a good working knowledge of money, they find it difficult to deal with it in their adult life. They’ll learn eventually but why not teach them now and save them the hardship later?
How do we start?

1] Get a piggy bank – Remember the different shapes and colours of the piggy banks we used to have as kids? Every coin into it made us feel like a millionaire. What a feeling! It can happen even now. Get your child to get a piggy bank and teach them to save in it. And maybe as an incentive you can offer to add the same amount or something equivalent to it at the end of the month, like interest for the amount saved.
There, you have taught them both about saving and the concept of interest. Sounds silly but believe me, they will get it sooner or later. Some understand it quickly and for some it takes time, but it will happen.
2] Play acting – Kids love play-acting. They enjoy enacting like they are at a restaurant or a shop counter. Use this opportunity to teach them about money. Keep it simple – introduce the currency, let them do the financial transaction. It gives them something adult-like to do, makes them feel confident and develops a sense of responsibility.
3] Give incentives, not allowances – Instead of giving them weekly allowances, tell them that they’ll get paid if they finish all their chores for the week or complete their schoolwork on time or follow through with a habit daily (like making their bed or cleaning their room or whatever habit you want them to learn).
Getting Financial-literate in the middle school years
4] Let them earn it – Yes, earning makes it dearer. Set out a list of chores they can do around the house and pay them at the end of the week. Let them maintain the accounts making them feel responsible and important. If it’s not accounted, they don’t get paid. Simple. The results may not always be to your liking but it’s worth a try. I got my kids to start maintaining accounts; while one has been maintaining it meticulously (even taking my signature to validate it!), the other one makes a new account book every month!
5] Plan their expenses – Once you’ve decided on the allowance amount, ask them to plan what they want to do with the money. You can assist them to decide how they can use the money, which should include a little bit of savings.

6] Start the saving habit – It’s never too late to learn about saving. Talk to them about the importance of saving. Give them real-life, relatable examples. Make a small savings sheet and show them how much they can save with a few changes.

Eating homemade lunch at school, not having a soft drink or junk food every time they step out, restricting usage of phones/apps (compare bill amount), frequency of eating out, and more such things which can be regulated. Once they can see how much they are spending (from their allowances) and how much they can save, you will be surprised how easily they’ll be able to manage within their allowance.
7] Being selective about their purchases – Instead of buying things for them as soon as they ask for it, get them to pay for it or save for it. Things like ice cream or a toy or chocolate, let them treat themselves with their own money. It will teach them to think twice before buying and stop them from being impulsive.
8] Comparing strategies and shopping lists – Another way to make them conscious spenders, get them to compare prices. Say, if they want to buy a bucket of ice-cream, ask them to check out the prices of the different brands/flavours/quantities. This exercise makes them aware of the cost of items, of which they would otherwise be unaware.
For older kids and high schoolers
9] Decide how to spend smartly – Spending is easier than saving. Get your teenagers to discuss how they plan to use the monthly allowances or earnings. Make them aware of saving options, show the bank statement (preferably of their own account) to understand it and let them see the interest accrued on their savings. It’s both motivating and exhilarating.

10] Teach how money can grow – Another important thing to teach them is about growing their money. Simple tips about investments could be the beginning of moulding a prudent adult. Either they can have a joint bank account with you (in case they of minors) or a personal bank account. Let them monitor the savings and the interest it generates.
11] Set spending priorities aligned with their goals – Money earned during the summer jobs or internships need not be spent on just indulgences. Encourage them to set goals and aim to save for them. They are old enough to understand the value of money and need to be prepared for the adult world they are going to step into soon.
Let inflation or rate of interest not be just textbook words. Show them how it applies in the real world. They should understand how it affects their spending power. It will help them plan their finances better.
12] Don’t ignore the importance of emergency funds – You’ll always be there for them, but they need to understand the importance of saving for a rainy day. Let them decide how they want to go about it and then help them to create an emergency fund.
13] Managing credit cards/personal accounts – Before they move out of the house, ask them to start managing their bank account, and more importantly their credit/debit cards. Though easy to use, it is a big job. Link it to their personal accounts to encourage them to think prudently before swiping the card. The best way to learn is through real-life experience.
What Can We Do to make them financial-literate?
As parents, our job is cut out pretty clearly. We love them unconditionally and that’s why it’s our responsibility to teach them well. And teaching them about money, and managing money should be one of the top priorities.
1] Set an example – Remember that they are watching you and learning. We must try to be the person we want them to become. Show them how to handle daily accounts, how to budget, how to plan for trips, leisure or big purchases, how to pay bills and how to avoid debts.
2] Everything costs money – Nothing comes for free, and they need to understand that. Ask them to compare costs before buying. If you’re paying them for a chore, then make sure they do it. They also have the option to get it done by someone else if they’re ready to pay them. That’s what’s going to happen later when they’re on their own. They’ll have to pay for services if they want to use them. Or else, do it themselves if they want to save. It’s their decision to make.

3] Avoid impulse buys – That’s one lesson they need to learn at the earliest. Don’t just buy as soon as they ask you to. Let there be an incentive – ask them to save for it or you could go 50-50 on the cost. Let them find out if it’s a need or wants. Or, it could be a reward for some achievement. This teaches them to be patient and re-evaluate their decisions; their choices may undergo change during the waiting time.
4] Practice good financial behaviour – For the children to develop good financial habits, we must make a consistent effort to practice what we’re teaching them. Show them ways of managing their money through good spending and saving methods. Let them think through their ideas and plans, motivate them to invest.
5] Teach them contentment – And last but not least, the children must be taught to be content. The allure of the material world is blinding, and the list of wants, endless. Teaching them early about spending judiciously and saving well will help them in the years to come.
As parents, our jobs are never done. But with changing times, what we need to teach them is also transforming. It is a job well done if we can nurture them to become good human beings who are prepared to face the world, armed with a good measure of strong character and prudent thinking. And their confidence will grow if they are financially sound. Do you agree? Let me know.
P.S. talking about being money-wise, check out these amazing offers on Amazon for some great discounts. BTW, I’ll get a piddly commission (at no extra cost to you) if you do purchase using any of these links.
An important concept explained in simple words and so relevant in today’s world.
Good learning for parents