Raising a child requires a lot of effort, time and planning on behalf of the parents. Across various age-groups of the child, parents need to learn and understand to cater to their specific needs. It is in the formative years of the child that parents can influence & streamline the learning cycle.

It has been already proven that children should be introduced to money at an early age. However, the method in which a 5 year old will be taught about money will be very different from the method for a 10 year old!

Parents should adopt simple ways to teach children about finances. In fact, the entire “money–learning’ process must slowly be integrated into their informal education process. The following learning tools can be used for children of different age-groups:

Age – groups 1-5 years
Children get gifted with money in families from an early age. Hence, parents should make a piggy bank for the children and deposit this money. They should also introduce children to various denominations of coins & notes. Children usually find these interesting and hence attention can be easily drawn to them. Parents can even help children learn counting using these tools. The money collected in the piggy bank can be periodically used to buy gifts/ toys for the child. Parents must remember to create an association between the piggy bank and the gift so that the child understands that something from the piggy bank ‘ money’ had to be exchanged for the toy/gift.

Parents should also open a savings account in the child’s name to ensure that formal saving and investment happens for the child.

Age - groups 5-10 years
Children usually start going to school at this age and they need little allowances to use at canteens, etc. By this time, children are aware of something called ‘money’. Now parents can formally start giving small amounts like Rs.10 to children to buy pencils, comics or even chocolates. Also, parents can start sharing about the ‘child’s bank account’ with him/her simply like:’ we are collecting money for you in the bank and how this money will be given to the child when you grow up’.

As children grow up, their allowances can be slowly increased. Better still, children should be encouraged to actively participate in household chores by giving them monetary incentive for doing some work. For eg: if the child cleans his/her room or helps you in house cleaning, extra allowance must be given to the child. This will not only inculcate positive work values but also help the child appreciate that money is not freely available and requires some amount of hard work to be earned!

Similarly, rewards to children for excelling at academics can be monetized and linked to examinations. A penalty could also be levied to drive home the importance of hard work to earn money

Age - group 11-15 years
This is the trickiest age for children since they start believing that they are adults now and need to be dealt like one! In this age-groups, children are more aware of their environment and surroundings than parents understand them to be. Their opinions and desires are largely governed by what their friends & colleagues in school adopt. They want to be part of the ‘ happening crowd’.

Parental responsibility assumes greater heights in this age-group. For eg: parents may often be faced with a situation where the child wants to buy a very expensive game/doll just because his/her friend has bought it. Parents need to explain to children why/why not the gift can be bought . Maybe the purchase of the gift can be linked to the child’s excelling in a particular field as desired by the parent. At this stage, parents should formally start giving ‘pocket money’ to children which is a fixed sum per month and define the goods that children need to fund out of this money

The concept of savings, spending, income, interest must also be introduced to the child at this age. These values inculcated at an early age will help the child grow up to a financially responsible person.

Age – group 16- 18 years
At this stage, children are becoming adults and hence need to be given financial responsibility. For eg: they must be involved in the regular decision making in the house as well as in the discussions about their own future. If the child wishes to go abroad for further education, it involves huge financial outflow and the child must be made aware of family financial limitations if any.

Teens should be formally introduced to handling their own bank accounts and ATM/debit cards. The concept of credit cards should also be introduced to them. The ‘pocket money’ concept should evolve to a higher level of financial independence and accountability.

Parents can even encourage children to do part –time jobs during holidays/ breaks to understand the ‘hard work that goes into earning money’!

As parents, it is your responsibility to ensure that your child is a financially responsible person. Proper financial education forms a part of the parental guidance required during the formative years of a child. We must be conscious of the importance and start early to ensure that we do not miss the bus!