When Should I Teach My Child About Money?

Published by Sharekhan Education | May 4, 2021

When Should I Teach My Child About Money?

“When should I teach my child about money?”Ramanik asked his financial advisor. My son Ravi is 3 years old and was very curious the other day, to know what I gave the shopkeeper before we walked out of the shop with a bag full of goodies. “What did you give him daddy?” he asked.

Ramanik was amazed that his 3 year old was asking him this question. He felt it was time to teach his son about money but didn’t know where to begin. As children grow, their money interactions increase, leading them to relate everything to money. It’s crucial for parents to give early money lessons. These early money lessons can serve as an important link to becoming better money managers as adults. Therefore to enable your children manage money better as parent’s you need to gradually introduce them to the concept of money from a very young age say from the age of 3 years onwards. In simple terms this means telling the child what money is and what it can do and how keeping aside some can come in handy in difficult times.

All this and more cannot be achieved in a day. Remember it is a lifelong process and think aren’t you still learning more about managing your money well?

So let us take a look at when and what you should teach your children about money.

For children in the age group of 3 to 5 years the first money lesson would be to introduce them to the concept of money. Explain to the child what money is and let them handle and differentiate between the different denominations available.

Next step would be to introduce the savings concept.

For children in the age group of 6 to 9 years gradually introduce this in the form of putting daily allowance into a piggy bank and letting it grow over time and then letting them use it for purchasing their toys etc. this will give them a sense of being grown-ups. Towards the end of this age group introduce them to the banking system. Take them to the bank and open a children’s savings account for them. Another concept that needs to be introduced here is “plastic cards”; those that you useinstead of the money, to get things. Explain to them what credit and debit cards are.

Concept of Lack

So far your children have learned that money can buy them things that they want. Next you need to introduce them to the concept of “Lack”; they need to know that if they finish what they have they won’t be able to buy anything and need to keep aside some money for the rainy day. So now that they are in the age group of 10 to 12 years they are more mature then before. Now it would be wise to move ahead and teach them about financial security that comes from keeping money, more than spending it randomly. Give them money that is labeled as “emergency money to be used only in case of an emergency”. For example they could use the money to buy some lunch if mommy forgot to give them their lunch packets.

Your children are now steadily progressing in their money lessons. By now they have become experts in handling money they know the difference between a ten rupee note and a hundred rupee note. They can count (well most of them can) and bring back the exact change from the vendor. They also know a little bit about savings.

What next then?

From 13 years onwards (let’s not cap it any more) it’s time to take them through serious money management. It is time to give them their own spending money; their very own pocket money. At this age children are elated to get pocket money, which they can spend without having to ask or tell anyone what they are spending it on. Let them enjoy for some time and when they realize that they have spent a whole month’s money in a few days or weeks it is time to talk about budgeting and managing their expenses the right way. So avoiding impulsive buying, differentiating between needs and wants and finally keeping a track of what they spend on should be on the top of the list of lessons for this age group.

The money lessons don’t end here. As your children grow and mature into young adults, teach them the importance of planning for their life goals. Of course they did this as kids but now things are different. They would soon be entering college or some of them may even start a career. So talk to them about the various investment options (like mutual funds etc.) available which can be useful tools to invest and grow their money in the long term.

Remember teaching your children money lessons at the right time can surely make them good money managers in the future.

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