Teaching your kids about money

I tried to explain to my then 5-year old that we cannot buy her another toy because we didn’t have any more money. To emphasise my point I showed her my empty wallet. Her solution: But you have the ATM card, get money from the machine! Read on to know my attempts to teach my child about this very important aspect of life

At her age, my daughter Sona assumed that the ATM is full of money that anyone with a card can take. I had to then try and explain the concept of salaries and fixed incomes to her. That set me thinking — I need to make her understand the importance of living within one’s means.

I also read that a Cambridge study found that kids form their money habits as early as 7 years of age! They observe you and internalise your money habits — are you giving in to impulse buying or do you sleep on a big-ticket purchase?

Do you use your credit card more often than your debit card? Are you advocating frugality and then splurging yourself? Are you giving in to tantrums and emotional blackmail? As an only child and only grand-daughter in a family of boys, she was being indulged a lot, making lessons in money management a necessity. A difficult one!

Fixed Income

The first thing I did to avoid tantrums in public spaces was to give her a fixed sum of money. A typical outing to a mall would start with her demanding that we go to her favourite toy store where she would want to buy everything. Next, she would want to go to the arcade and play all the games. We generally disallowed her and this would lead to tantrums and as she grew, sulks.

Since she was too young to be given pocket money, I started by giving her a fixed amount at the beginning of a shopping trip and telling her she could spend it any way she wanted, but would not be given any more on that particular visit. I started with ₹100 and now that she is almost 9, at our last visit to a mall, I gave her ₹500.

I am happy to say, that once she realised that ₹100 can hardly get you anything, she consequently understood the concept of saving! She had her heart set on an archery set which cost about ₹ 1,800. So not only did she start saving for it, but also did some mental math and asked us to combine it with the money she gets from grandparents to reach her goal.

Lesson learnt: Living within one’s means, saving for big-ticket items, consolidating income from different sources.

Role-Playing

Read the rest of this article on our Basis page and discover many more useful articles that help you take charge of your finances.