As a parent you are the first teacher to your children. They learn the basics at home, observing and imitating you. Every moment with your child is a teachable moment and you can use this opportunity to introduce the concept of money, earning, saving and giving. Having conversations about money builds children’s confidence on the subject and helps to develop their financial skills.Children who are encouraged to talk about money tend to do better with money when they grow up.

Let us discuss a few ways through which we can impart this knowledge to our children.

Piggy Bank – Most of us have maintained a piggy bank in our childhood. This is the most primary, but effective, way of teaching a kid the importance of saving money. Ask your children to put a part of their allowance in that piggy bank regularly. This will inculcate the habit of saving in them  as they will see the money grow in the piggy bank with every rupee they add. Talk to your kid about the benefits of saving money and how each penny saved today can grow into a rupee tomorrow.

Earning can be fun – The important lesson that you can teach your children is that earning something makes you feel good. The feeling of accomplishment that comes with earning for your hard work is rewarding. Have your children help you and your spouse in activities that are outside of the routine and reward them for a job well done. Children like to be appreciated and they are always looking at us for validation.

Not all work equals to money – Routine/regular work/chore that your children are supposed to do, like helping clean up after dinner, organising their room, helping with laundry or cleaning dishes, should not be rewarded. They should understand that these chores are done as part of the family and inculcate in them some disciplines and principles of life and it is a shared responsibility. Also to imbibe in them, every action cannot be quantified always and can be subjective, intangible and cannot be measured with money like life value systems.

Teach your child about value buying – We should teach our children how to spend money judiciously. This relates to an important aspect of spending, which is value buying. While teaching your kid about money, you should discuss his/her spending choices. You must discuss where and on what they should be spending money. You should introduce to them the idea of buying things that are necessary rather than spending all their pocket money on something that is not required. This could be well explained to your kid if you give them choices while buying things for them. For instance, if your kid demands a toy and a book, don’t easily give in to both the demands. Tell them that with their pocket money, or rather with their budget, they can buy only one of the two. At the same time, help them with their decision to select the best option.Encourage them to think of events that may come where they may need money for like a birthday, festivals or a toy. This will teach the concept of budgeting.

Money actions – Involve them in small activities like grocery shopping, buying a present or books. Teach them to look at the price, manufactured and expiry dates,  compare the price of similar products, and to make a sensible thoughtful decision to buy a cheaper/ better quality product or service that is on sale, how everything that is expensive does not have to be the best, how money is exchanged – all these are practical lessons that can go a long way in moulding their financial literacy.

Savings – Teach them to respect money and the value of things that they possess. The hard work and effort that goes in by the parents in earning that sum and buying it for them in younger years. As they grow up, they should develop and compartmentalise whatever they earn to be split into savings and spending (and charity if you want). Without an exception, the money that goes into the savings jar should not be disturbed. You can also teach them about saving for an emergency, they may be young to understand but this way they will develop a discipline of saving first and spending later.

Through Games – There are many games that involve money like Monopoly or Careers which allow children to plan, trade and manage fake money. There are digital games that are similar to board games. This is a fun way of teaching them about earning, saving and spending.

Talk about investing – Finally, savings should eventually lead to investing. As the kids grow, you should introduce them to the concept of investing their savings and highlight the idea of how the money could grow through investments. The first step in this direction would be to encourage them to open a savings account and help them see and track their money growth. The money saved and the interest earned on it could come in handy in the long run to meet their financial requirements.

Be a role model – Practice what you preach! It is no good if you don’t follow what you are preaching. This will only help if you walk the talk. You don’t want to get into a situation where your children point out that you are not following your own rules!

Introducing money talk at a young age can inculcate the good habit of saving and it will become a second nature to them. This is a life lesson that you can give as a valuable gift to  your children to become financially savvy adults.