Teaching Kids About Money: 7 Valuable Lessons for Parents | Business - Times of India (2024)

Teaching the importance of money to kids is crucial for their

financial literacy

. Starting early instills valuable lessons about

budgeting

,

saving

, and responsible spending. In today's parenting culture, there's a constant pressure to fill every moment of a child's day with activities and purchases. It feels like there's no escape from this cycle. Kids are always expected to be busy, and buying things seems like the norm rather than a thoughtful decision.
But how can parents teach their children about money in a more intentional way? Leading by example is key.

In a column in ET Uma Shashikant, the Chairperson,

Centre for Investment Education and Learning

lists out 7 money lessons that parents should look to give to their kids:
Fun doesn't always need money
Encourage your child to enjoy experiences and activities that don't require spending. It's important to establish a culture within the household where non-material joys are valued. If there's no example set by adults engaging in such activities, children may struggle to grasp this concept.

Don’t make mindless gifting a ritual
Life doesn't come with a checklist of mandatory activities. We've let rituals dominate our lives to the point where we exchange meaningless gifts at every opportunity. A friend who visits, spends time, and shares conversation is already giving a valuable gift. There's no need to diminish this generosity with obligatory material offerings. Mindless gifting is a behavior your child might adopt if they see it modeled.

Avoid assigning a price tag to everyday tasks
Everyday tasks shouldn't be seen as transactions. Encourage a mindset of generosity where children do kind deeds without expecting something in return. When we turn everything into a tally of who did what and who deserves what, children start to believe that rewards only come in the form of material goods and measurable benefits.
Don't allow others to diminish your authority
Parents should assert their authority to decide who buys things for their child. It can be challenging when grandparents try to override these rules out of love. A clear conversation or tactful approach is needed to establish boundaries. Grandparents should graciously respect the new parents' decisions, understanding that it's about clarity for the child regarding who is in charge, rather than disrespect.
Teach the importance of not needing everything
Your child is at an age where they can understand the concept of opportunity cost and have a natural sense of fairness. Use this to help them grasp the idea that they can't always have everything they want. Present them with simple choices and let them decide. Whether it's choosing between a movie or a fancy dinner, or picking a weekly activity, practicing these decisions teaches valuable money lessons in a straightforward way.
Avoid using bribes or gifts out of guilt
Avoid resorting to yelling, screaming, or negative behavior, and don't try to make up for it by buying things or spending money. Children are perceptive and can manipulate situations. Working mothers are focused on making a difference, not simply having fun. There's no need to feel guilty for being away and compensate with gifts or treats constantly. Traveling or socializing shouldn't be about material offerings to make up for time away from the child. Instead, make sensible choices with your time and avoid unnecessary guilt as a parent.
Allow your child to make minor choices
Even a two-year-old can learn decision-making skills by picking out fruits at the store. As they grow older, they can continue to compare and choose, even if they can't do complex math. Taking ownership of their choices instills a sense of responsibility and empowers them. They become active decision-makers, not relying on blaming their parents for everything.