It’s a Children Day. And this makes it one day out of many where you can shower your kids with all the gifts and love. However, this children’s day let’s take the value of our gift one notch higher. Yes, we are talking about the most valuable lesson they will ever learn in their lives: The money lessons and the wealth creation process. As a parent, here is how you can teach your kids the intricacies involved related to 3S: Saving, Spending and Sharing.

Research and Ranking list down 9 money lessons which can help them to create wealth in the future.

Kindergarten Kids (Ages 3-6)

Lesson 1: Money is hard to earn and easy to lose. Guard yours with care – Brian Tracy

The last weekend when I went to a shopping mall, I heard one interesting conversation between a mother and her kid. The kid was obstinate about buying an exorbitant doll and seemed like her mother did not have enough budget for it. After becoming aware that her mother doesn’t have the money, she said, “But Mama all you have to do is show the card.” Before you can show them how to manage money, they need to know how money is earned through hard work and not grown on trees.

How: Try to explain them in simple words about your day in an office. They may not understand everything, but the point is to tell them that you are working hard to earn money.

Lesson 2: Patience is bitter, but its fruit is sweet – Aristotle

Sometimes good things take time. It may prove beneficial for the kid to understand the importance of waiting before they can reap their benefits.

How: Take them to the garden or a fair where you have to wait in a queue before you can enjoy the ride. During this duration, you can explain how this waiting time will eventually reap its sweet fruit.

Lesson 3: Great satisfaction comes from sharing with others

With saving and spending, it is pivotal to display gratitude for what they have in life. This quality needs to be inculcated right in the childhood.

How: Maintain three jars at your home each for Spending, Saving and Sharing. Let your kids take a call on how they want to spend their money. Every time they receive money, ask them whether they wish to spend on small things like chocolates and ice-creams or they want to save for buying the dress they liked at a store. They can even allocate money for the purpose of helping a friend or a deprived child. After all, we all (even the schools) teach them that ‘Sharing is Caring.’

School Goers (Ages 6-12)

Lesson 4: A budget is telling your money where to go instead of wondering where it went – Dave Ramsey

The best method of teaching kids to manage money is by giving them weekly allowances to start with. Let them figure out the way to save money for their favourite game or dress. This will even help them to keep a wish-list of the things to buy. Keep the targets realistic and achievable. The kids may get frustrated if they have to save money for a longer time.

How: With the advent of the digital era, most of the kids are tech-savvy. You can help them to maintain a notebook or a file in the laptop to keep track of savings and expenses. Tell them to check the budget regularly to make sure they have saved enough for the cycle/skates which they have waited for long to buy.

Lesson 5: Sale is not a good reason to buy

The kids are smart enough to notice a discount or sales offer banners. The next time they tell you to buy something because it is cheap, ask them whether it is really the thing they need. Here, the importance of wish-list comes into the picture. The point is not to come across as a stern parent, but this act will keep impulsive purchases by your kids in the future at bay.

How: The next you go for a shopping with your kid, think the rationale behind your purchases loud enough so that your kid can hear. Saying out aloud like “Can I get a pickle at a better cost somewhere else?” or maybe “Do we need a pickle?” will help your kids to learn the value of prioritising expenses.

Lesson 6: Talk about money at home

This is the most common accidental mistake committed by parents. They are under the illusion that discussing money is the shameful or embarrassing habit to get into in front of their kids. However, it is good to indulge in healthy budget conversations with your spouse at home. The kids will get a grip on the thought process of both their father and mother.

Teens (Ages 13 and above)

Lesson 7: Compound interest is the eighth wonder of the world. He who understands it, earns it…He who doesn’t…pays it. – Albert Einstein

Start with a simple wealth creation tip – Importance of ‘Power of Compounding’.  

How: The most effective way of explaining the concept of compound interest is by narrating them the story of a king who lost to a farmer in the game of chess.  In this story, the king promises to gift the farmer anything he asks for after losing the game to him. The farmer only demands one grain of rice for the first square of the chessboard, two grains for the second square, four grains for the third square, eight grains for the fourth square and so on for all the 64 squares. In short, he asks to double the number of grains in the next square compared to the previous square. In the first square of the chessboard there would only be one grain of rice but when the king comes to the 64th square, there would be 18 million trillion grains of rice. This is a very powerful example to demonstrate the magic of compound interest for disciplined long-term investments to your kids.

Lesson 8: Money is beyond plastic

Help them to combat the tendency of getting into trivial purchases by using a debit/credit which could mire them with hefty debt in the future.

How: You can again take the aid of a financial calculator to show them how the concept of ‘Buy Now, Pay Later’ works. Tell them about the interest rate and show them how the interest is getting piled up on the debt which can be deter their wealth creation process.

Lesson 9: Eat to meet long-term goals not short-term satisfaction

Teach them the importance of long-term investments to meet their long-term goals. For kids, long-term goals can be a toy, dress or a book they want to purchase 2 months down the line.

How: Teach them the art of long-term investments through regular savings. For kids aged above 15, you may also consider introducing the basic concept of investing in stock market for long term various asset classes such as fixed deposits, fundamentally sound stocks and post-office saving schemes. The best idea would be to create a simulated learning environment by playing Indian stock market games or letting them operate their own bank account.