It is never too early to introduce kids to money concepts

• Kids should be taught that money is not unlimited, and based on income one has to prioritise the spends.
• If a kid asks for multiple things, they need to prioritise items.
• Parents can open a kids’ bank account and start parking the amount they receive.

When six-year old Dwita Das used to go and play in the garden about a couple of years ago, she would ask her mom for candies. Her mom would give her five rupees and the shopkeeper would lay down the different options she had- candy and gold coin chocolate, which were the only things that were available for five rupees.

Dwita would be happy with that, but when she asked her mom for chocolate that cost ₹10 or ₹20, her mom told her that she could have it, if she saved the money for two or four days.

For her, this was the first initiation to the fact that you need money to buy things, you cannot buy something if you do not have enough money and most importantly, if you want something bigger or better, you need to ‘save up’.

Parents need to inculcate money concepts in their kids when they are young, as soon as they learn about numbers in school.

Money is limited, so is what you can buy

Kids who grow up in an atmosphere of abundance should learn that money is a finite resource.

Delhi-based Gulshan Singh (name changed), father of two daughters, 9 and 14 years old, says that kids are different. Some kids may demand that he or she wants money or a toy all the time, and in that case it becomes important to educate them about the value of money and that money is not unlimited.

Until she was about four, four and a half years old, Dwita did not understand that money was limited. She thought that you can get money by walking into a bank and then buy whatever you want. Slowly her parents told her that earning money was difficult and since certain things were very expensive, they were not going to buy her everything she wanted.

There used to be a lot of coins lying around the house and when she asked what they were, she was told the difference between 1, 2, 5 and 10 rupee coins and that you could get such and such things with that. That is when her mother started to take her to the shop.

“One can teach their kids how they earn money and then how they spend it. This way the kids would understand that money is not unlimited and based on income one has to prioritise the spends,” says Abhishek Kumar, founder and chief investment advisor at SahajMoney, a financial planning firm

It is important to plan how to spend your savings

When nine-year old Ankush (name changed) was 5 years old, his mother bought him a ₹5 chips packet everyday when he went out to play. Since that became a habit and since chips everyday were not healthy, his mom decided to give him ₹20 every week and keep the money with her. Now, he could have chips only four days a week. Every time he would spend ₹5, his mother reminded him how much was left and how many days he would have to wait till he got ₹20 again.

Now that his money was limited, not only did Ankush not have chips everyday, he cut down from the chips to a one rupee candy, so that he could buy something everyday and his money would not get over too.

When Singh visits a mall, his younger daughter will walk into Hamleys, like a soft toy and want to buy it. Let us say that the toy costs ₹1,000. Singh would then explain to her that if she did not buy the toy at Hamleys she could buy a similar toy at a local store for ₹300, one book and also have icecream with the same money. What would she prefer to do? Would she like to spend ₹1,000 in one shop or at four or five places.

It was her choice, but such a lesson would teach her how to plan, how to spend money, and also to think through before she wanted to make an impulsive purchase, something many adults fail to do.

“If a kid asks for multiple things, tell them that there is a budgeted amount to spend and she has to prioritise which item she would like to spend it on,” says Kumar.

Piggy bank: A child’s first tryst with savings

Piggy banks are like fun money mentors for kids! They're cute and they help children learn to save. You put coins or notes inside, and they show how saving little by little can become a lot. It's like a cool game where you watch your money grow, especially if they are transparent. They teach about spending wisely and waiting for things you really want. Piggy banks make learning about money super fun.

During the pandemic, Ankush would not go out and he used to save the ₹20 he received every week. Also during the pandemic, a lot of people who came to their house would give him cash gifts. He was encouraged to put all his money in a piggy bank. After a couple of years of such deposits, he had a good ₹3,000 odd which his father deposited in the post office. Ankush had started off on his savings journey at a very early age!

Parents can open a kids’ bank account and start parking the amount they receive as gifts in that account and show them their money grows if they delay their spending.

Dwita and her parents are going on a trip to Japan in February. Dwita has a long list of things she wants to buy- a kimono, Hello Kitty toys, Studio Ghibli toys and so on. So her parents gave her a piggy bank , where she can collect all the money she gets from her mom and from her monetary gifts, especially from her grandparents.

She can also get ₹10 for cleaning her room everyday and also with helping her mom with chores. Her mom has told her that when she goes to Japan, she can buy her toys from the money she has saved up in her piggy bank.

When the other day she asked for ₹50 bucks to do her homework, her mom had to explain to her that that was a part of her education and she could not get paid for it!

While parents can teach their kids money concepts and make them understand the value of money, it is equally important to set the right example. If the parents are blowing away money in buying luxury items and throwing lavish parties, the kid may think that is the right way and worse, feel entitled.

Like anything else, a strong foundation of what money means and how it works will set your kids up for a future where they know how to value money and to enjoy it.