The most basic lesson about money is that you have to pay money to buy something. Nothing in life comes free. Though kids will understand it eventually as they grow older, it is important for them to grasp this concept at a very young age.
One of the biggest oversights in our education system is the fact we don’t have curriculum teaching children about money from a young age. It is even more surprising when you see that as adults they are least aware of this important part of their lives.
Hence, as parents, it becomes your duty to educate your children about money to prepare them for the future. Parents can help them understand that financial decision-making is a necessary quality from a young age.
While it is never too late to explain to your child about the money, you can’t explain credit cards and loans to a 5-year-old. You have to take baby steps towards educating them in stages. This will help them grasp the concept of money from a younger age and understand it better.
Here are a few suggestions of things you can teach them at each age period:
Age 8-10
The most basic lesson about money is that you have to pay money to buy something. Nothing in life comes free. Though kids will understand it eventually as they grow older, it is important for them to grasp this concept at a very young age.
Teach them about the value of each note and coin by telling them the prices of everyday household things. For example, a toffee costs Rs. 1 but a larger chocolate costs Rs. 20.
Age 10-12
Now that your child understands the value of money for different products, the next step is teaching them the basics of savings and expenditure. You can give your child an allowance every month and ask them to split the money and put it into two jars – a spending jar and a saving jar.
Discuss out loud and analyse together whether you really need a particular product or if you could do without it. This helps them understand not to buy products just because they are on sale.
Age 12-15
When your child is in their teens and on the cusp of leaving school and entering college at the right age to learn to about banks, interest and the benefits of saving money sooner rather than later. Take your kids to the bank and open a minor Savings Account for them. Teach them about interest rates, compound interest and how you can make more money by saving at a young age.
Ask your child to save for that guitar or cricket kit that they have always wanted. Since they are slightly expensive, your child will learn to say ‘no’ to unnecessary expenditures like chocolate to buy something he is more passionate about.
Age 16-18
Now that your kid is in his late teens, it is essential to be open and discuss college-education expenditure. Be upfront in telling your kid how much of the expense you can handle so that they don’t have unrealistic expectations about college. Ask your children to check out different colleges and the total expenditure including fees, hostel charges, food charges, etc.
Teach them about scholarships and student loans so that they can make an informed decision instead of getting discouraged by the course fees. This way your child will learn about loans, debts, EMIs, etc.
Age 18-20
As your child steps into adulthood, explain the concept and the workings of credit cards. You need to clearly explain that they should use a Credit Card only if they can make a full repayment during the next payment cycle.
Let them know, ill-advised expenses and over-spending might see them paying hefty interest with each passing month.
If you don’t teach your kids how to manage money, somebody else will. And that’s not a risk you want to take! We’ll show you how to give your kids the head start you wish you had and set them up to win with money at any age.
1. Use a clear jar to save.
The piggy bank is a great idea, but it doesn’t give kids a visual. When you use a clear jar, they see the money growing. Yesterday, they had a dollar bill and five dimes. Today, they have a dollar bill, five dimes, and a quarter! Talk through this with them and make a big deal about it growing!
2. Set an example.
A study by the University of Cambridge found that money habits in children are formed by the time they’re 7 years old.(1) Little eyes are watching you. If you’re slapping down plastic every time you go out to dinner or the grocery store, they’ll eventually notice. Or if you and your spouse are arguing about money, they’ll notice that too. Set a healthy example for them and they’ll be much more likely to follow it when they get older.
3. Show them that stuff costs money.
You’ve got to do more than just say, “That pack of toy cars costs $5, son.” Help them grab a few dollars out of their jar, take it with them to the store, and physically hand the money to the cashier. This simple action will have more impact than a five-minute lecture.
4. Show opportunity cost.
That’s just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.” At this age, your kids should be able to weigh decisions and understand the possible outcomes.
5. Give commissions, not allowances.
Don’t just give your kids money for breathing. Pay them commissions based on chores they do around the house like taking out the trash, cleaning their room, or mowing the grass.
6. Avoid impulse buys.
“Mom, I just found this cute dress. It’s perfect and I love it! Can we buy it please?” Does this sound familiar? This age group really knows how to capitalize on the impulse buy—especially when it uses someone else’s money.Instead of giving in, let your child know they can use their hard-earned commission to pay for it. But encourage your child to wait at least a day before they purchase anything

7. Stress the importance of giving.
Once they start making a little money, be sure you teach them about giving. They can pick a church, charity or even someone they know who needs a little help. Eventually, they’ll see how giving doesn’t just affect the people they give to, but the giver as well.
8. Give them the responsibility of a bank account.
By the time your kid’s a teenager, you should be able to set them up with a simple bank account if you’ve been doing some of the above along the way. This takes money management to the next level, and will (hopefully) prepare them for managing a much heftier account when they get older.
9. Get them saving for college.
There’s no time like the present to have your teen start saving for college. Do they plan on working a summer job? Perfect! Take a portion of that (or more) and toss it in a college savings account. Your teen will feel like they have skin in the game as they contribute toward their education.
In a nutshell
It is never too late to help your child grow up into a mature and responsible adult with knowledge of the world.