What Money Lessons Should Children Learn at Each Age?
Children’s Day Special Article – November 14
S. Karthikeyan, Founder - Mentor
WINWORTH, www.winworthwealth.com& www.propsaleglobal.com
+91 98409 36032
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Earning money is important, but knowing how to save, spend and invest it wisely is an equally important life skill. At what age should parents introduce these financial lessons to their children, and how can they teach them in a way that children can understand and practise?
A Small Story… A Big Lesson!
One day, eight-year-old Arun asked his father, “Dad, can you buy me a new bicycle?”
His father replied, “Of course! But I want you to save some money towards it as well. Try putting aside a small portion of the money you receive.”
From that day onwards, Arun started putting a part of his pocket money into his piggy bank. Over the next few months, his savings gradually grew. Seeing his efforts, his father added some money that he had already set aside and bought him the bicycle.
Arun was happy to get his new bicycle, but what made him even happier was the feeling that he had contributed towards buying it through his own savings.
This simple incident highlights an important lesson. When children learn the value of money and the importance of saving at an early age, they are more likely to grow into financially responsible adults who can make sensible money decisions.
Why Is Financial Education Important for Children?
Today's children encounter money in various forms from a very young age. They see their parents shopping, making online payments and purchasing products after watching advertisements. They are also exposed to digital transactions and various spending options.
However, children cannot be expected to automatically understand how money is earned, how to save it, what to spend it on and how to avoid unnecessary expenses.
While school education develops knowledge and skills, financial education prepares children to manage their lives responsibly. Therefore, teaching money management in an age-appropriate and gradual manner is one of the important responsibilities of parents.
3–5 Years: Introduce the Concept of Money!
At this age, children should be introduced to the basic purpose of money. Explain that money is used to buy things from shops and that every product has a price.
Parents can create a simple pretend shop at home, allowing children to buy and sell toys, fruits or other household items through role-play. Encourage them to put coins into a piggy bank regularly.
At this stage, the objective is not to make children understand the complete value of money. It is to plant the first seeds of saving and develop a positive attitude towards money.
6–8 Years: Teach the Difference Between Needs and Wants!
At this age, children can begin to understand the difference between needs and wants.
Explain that food, clothing and school supplies are basic needs, while a new toy, video game or another plaything is generally a want. Use everyday examples to help them understand the difference.
Parents can start giving children a small weekly allowance. Encourage them to spend a portion of it and save the remaining amount.
One useful method is to introduce three separate piggy banks with the following allocation:
· 50% – Savings: To develop the habit of saving regularly.
· 40% – Spending: To meet small personal wants and expenses.
· 10% – Sharing: To help people in need or contribute to a good cause.
This simple exercise helps children understand how to divide and manage money responsibly.
9–12 Years: Teach Them to Maintain Income and Expense Records!
At this age, children develop the ability to understand simple calculations and financial records. Encourage them to write down how much money they receive, how much they spend and how much they save.
Parents can also teach them to compare the prices of the same product across different shops. This helps children understand the value of money and the importance of making informed purchasing decisions.
Another useful exercise is to encourage children to set a savings goal for a particular item they wish to buy. Ask them to save regularly until they reach their target.
Learning to wait patiently and work towards a financial goal helps develop discipline and responsible money habits.
13–15 Years: Introduce Banking, Interest and Compounding!
During adolescence, financial education should move to the next level. Introduce children to the basic functioning of banks, savings accounts, recurring deposits and interest.
Explain how banks pay interest on savings and how money can grow when the interest earned is also saved and allowed to earn further interest. This is the basic principle of the power of compounding.
Since digital payments are becoming increasingly common, cybersecurity awareness is also essential.
Children must understand that bank passwords, PINs and One-Time Passwords (OTPs) should never be shared with anyone. They should also avoid clicking on suspicious links or responding to unknown messages asking for banking details.
16–18 Years: Explain Loans, Investments and Taxes!
At this age, children should acquire the financial knowledge needed to become independent and responsible adults.
Explain what loans are, how interest is calculated and how credit cards should be used responsibly. They should understand that spending through a credit card is borrowing money, not receiving additional income.
Parents can also introduce the basics of the stock market, mutual funds, insurance and income tax.
It is important to explain that investing is not a shortcut to becoming rich quickly. It is a disciplined process of growing money over the long term to achieve financial goals.
Children should also be cautioned against investing in unfamiliar products or schemes simply because they promise unusually high returns.
Above 18 Years: Prepare Them for Financial Independence!
When children enter college or begin working, they should know how to manage their income and salary.
They must learn to allocate their monthly income towards essential expenses, savings and investments. They should also understand the importance of building an emergency fund to deal with unexpected situations such as medical expenses or job loss.
Adequate insurance protection and systematic investments for long-term financial goals should become part of their financial planning.
Most importantly, they should understand the advantage of starting investments early in life. The longer the investment period, the greater the opportunity to benefit from the power of compounding.
Age-wise Money Lessons for Children
|
Age Group |
Important Financial Lessons |
|
3–5 years |
Introduction to money and the habit of saving in a piggy bank |
|
6–8 years |
Difference between needs and wants, basic spending and saving |
|
9–12 years |
Income and expense records, price comparison and savings goals |
|
13–15 years |
Banking, savings accounts, interest, compounding and digital safety |
|
16–18 years |
Loans, credit cards, investments, taxes and financial planning |
|
Above 18 years |
Income management, emergency funds, insurance and long-term investments |
Parents Must Lead by Example!
Parents play the most important role in teaching children about money. Children often learn more by observing how their parents spend, save and manage money than by listening to financial advice.
Therefore, parents can involve children when preparing the family's monthly budget. They can encourage them to compare prices while shopping for groceries and explain the importance of making spending
For invest and more details contact
S. Karthikeyan, Founder - Mentor
WINWORTH, winworthwealth.com/ & wealacademy.com, propsaleglobal.com
OFFICE:
10-B, 1st Floor, Tharamani 100 Feet Road, Baby Nagar, Velachery, Chennai - 600042
+91 98409 36032 / 044 42180009
Email id: info@winworthwealth.com
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Fellow
Chartered Accountant S. Karthikeyan is the Founder of WINWORTH. Financial
Advisor from the esteemed Asia Pacific region Singapore Financial Services
Associate.
He has visited over 15 nations, some of which are from the US, the UK, Dubai,
Hong Kong, etc. and took part in numerous workshops, primarily on insurance as
a business trip.
He began his profession as a regular person with a strong desire to succeed
constantly. He founded the WINWORTH Company, a wealth solution company, in 1991
with the aim of serving people and ensuring that everyone is a wealthy person.
As a writer and columnist, he is well-known among Tamil readers for his 52-week
Blank Cheque series of articles in Kumudham and his two-week pieces regarding
real estate and loan savings. WINWORTH has offered unfiltered and unbiased
financial guidance to people and companies for more than 30 years.
It is a state-of-the-art financial planning company that looks for the best
ways to enhance your income while guaranteeing you, not just stability but also
luxury.
Our primary goal is "How to make
ten crores in fifteen years of your life ". However, it can't be
finished in a single day. It can only be attained through proper and systematic
methods. Investments and that's the position we take!
Winworth's experience managing the finances of NRI clientele both outside
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