Financial lessons for kids: An age-by-age guide

Financial literacy is an essential skill for children to ensure that they develop healthy habits around money as adults. Teaching your children to be financially responsible early on will help them deal with monetary challenges successfully in the future allowing them to make the right decisions at the right time. However, it takes a lot of patience and sensitivity to inculcate money lessons to kids in an age-appropriate manner. Also, you need to model the right financial behviour to your kids if you actually want to inculcate good monetary habits in them. But many parents aren’t sure about when and how to start. Experts are of the opinion that you should start young. Talk to your children about money when they are as young as 7 to 8 years of age. Here are some fun and simple ways to initiate them to financial lessons.  

Ages 6-8 
The first lesson on financial literacy can start from pocket money. Give your child a weekly or monthly allowance according to your convenience. It will be a good idea to pay a part of the allowance in cash for spending and the rest for savings in a bank. For this, take your little one to a bank that allows the option of minor savings account for kids below 18 years of age. This can be a good opportunity to teach her about the concept of interest in saving that the bank pays.  

The next step would be to discuss with your kid about what he wants to do with the money. Make sure that this conversation is a lesson on responsible spending, budgeting, saving and impulse control. Help your child decide how much he wants to spend and the amount he wishes to save. Follow this up with a discussion on the areas of expenditure and the goal for saving. Once your kid has saved enough to meet his goal, start a conversation the difference between necessity and desire. You can ask him something like this, “Do you think you should deplete your savings for this?” However, let your child take the final call. Do not impose your views or decisions on him. This exercise will improve his decision-making skills while giving him an opportunity to bear the fruit or consequence of the call he takes. Additionally, encourage him to take up coin collection as a hobby. Gift him a nice piggy bank to store coins.  

Ages 9-12 
During this phase, your child will develop some mature thinking skills. It won’t be a bad idea to include her in a few of your family’s budgeting decisions while it comes to travelling, planning a family entertainment or even shopping for festivals. Discuss the options as well as your affordability and then ask for her inputs. Exposing your kid to these real-life situations will enable her to make judicious financial decisions. For example, she will be equipped to figure out if she wants to spend her money for one expensive dress or many outfits that will last for the whole year. You need to reinforce the idea of need versus want time and again for her to make the right decision.  

Ages 13-15 
This is the right age to introduce kids to the basics of tax and stock market. Talk to him about sales tax when he buys his favourite toys, books or chocolates. Explain what it, why it is levied on us and the rate. The next in line could be income tax. Listening to news channels during the budget session will give your child a clear concept about it. He will be able Apart from explaining the basics, get him to watch news channels covering budget session. The coverage will introduce him to the advanced concepts of tax slabs, special concessions and much more.  

As far as stock market is concerned, it will be a good idea to buy the stock of a company your child is familiar with. It could be a brand that she buys products or services from. Start by asking, “How about owning a small part of your favourite company?” Apart from clearing the concept of stock market, this exercise is going to help her develop interest in investment.  

Ages 16-18 
Talk to your teenager about income options. Look for part-time work-from-home opportunities together. Our jobs actually teach us to value money. Also, this is the right age to expose your child to the functionalities of debit and credit cards, rules, regulations and safe usage practices. One of the essential skills that your child needs to learn is blocking a card after losing it. While introducing these concepts is necessary, it, wait a little longer before you gift a credit card to your youngster. Also, this is the right age to take him through different types of bank loans, especially education loans.