Making your kids money smart!

Making your kids money smart!

It’s a pleasant evening and everyone’s happy until that one point where your kid spots the most random thing on the shelf and demands to have it. On the other hand, it could also be a relevant but an overly priced toy or a fancy looking something that you don’t think will last even a month.

Now how do you make your distraught child understand how their demand is not the most ideal or economical one? And by the time you try to explain why they can’t have it, they’ve already probably decided that you don’t love them anymore. While there is little you could do at that point, there’s a lot you could do before it gets to that point. Explaining to your children, the value of money, how it works, and especially explaining how it is limited and hence must be spent carefully goes a long way in getting your kids to understand the importance of money.


For 3 to 4-year-olds:

Start with explaining the concept of currency and how it works and move on to building their money skills.

Make it fun with the following activities:

  1. Re-visit your school days when you were taught basics like 1 Rupee = 100 paise. Show them different coins and notes and help them understand the value of every denomination. Give examples of material equivalents for the money. For eg. 1 rupee for a toffee, 3 rupees for an eraser and so on.
  2. Help them practice exchanging 2 rupee coins for a 10 rupee note and 5 rupee coins for a 20 rupee note.
  3. Role-play as a shopkeeper and set up shop with things inside your home. You can pick things of varying values like vegetables, cushions, toys, stationary etc. Put a label with a price on these things and hand over some money to your child and help them make decisions on what they can buy with the amount in hand.
  4. Explain the concept of a bank to them. You could compare the bank with a piggy bank to make it easier for them to understand.


For 5 to 8-year-olds:

Step 1: Teaching them how to best use money

Give them a small amount as allowance or pocket-money. The next time you go shopping, ask your child to carry their money if they think they would like to buy something. Make them understand that what they’ve been given, is all the money they have and they will not get a refill until next month.


Things you can do while shopping with them:

  1. Help them make choices and decisions while shopping. Explain how a certain toy might not be a wise idea if they already have similar toys.
  2. If it’s a store where you can bargain, do that in front of your child to make them understand how bargaining works. On the other hand, also explain to them when not to bargain.
  3. If they point to something which costs more than the money they have, explain to them how much money they will need to save every month to be able to buy it.
  4. Have your child hand the money to the cashier after helping them count and let them tell you how much change they should get back.


Step 2: Teaching them how to earn money

Kids need to learn how to increase the money they have. Explain how you earn money, this also gives you an opportunity to discuss your work with your child. You’ll be surprised how they pay attention.


  1. Make a list of jobs your child can do to earn money. Things like washing your car or bike, or something simpler like polishing shoes can be added to the list.
  2. Take this very seriously and deduct money when the job is not done right. This will help your child understand the hard-work that goes behind making money.
  3. Give them the responsibility of collecting newspapers and stacking them properly. In exchange, they can keep the money from the scrap dealer on selling it off.
  4. You can also help them sell their old toys, cycles etc. on e-commerce platforms that deal with second-hand goods. This will also help them develop the habit of not piling old things that are no longer being used.


Step 3: Teaching them significance of donating and sharing

It is very important for your child to understand the importance of sharing or donating money.

  1. Talk to them about the under-privileged and tell them how they can help in their own small way.
  2. Celebrate an occasion such as their birthday at an orphanage where they can play with kids of their age and donate toys, clothes etc.
  3. Give them 2 piggy banks – one with the label “sharing” and one with “saving”. The money they earn or get as pocket-money can be divided equally between the 2 jars and the sharing jar can be used to buy something for the maid, the watchman or their children. Involve them actively in the buying and giving process so they can truly experience the joy of giving.
  4. Help your child team up with kids in the society to hold a donation drive where the kids can go from door to door and collect money, old clothes or books to donate in charity. Complete the loop by actually taking them to the place where the collected items are donated.


What to refrain from:

  1. Try not to incentivize basic household chores. They should help around the house without being paid for it. This is to avoid making them link everything to monetary gains.
  2. While you should explain and help them weigh the pros and cons of investing their pocket money on something, leave the final purchase decision on them. Once you hand them the money, it’s theirs to spend.
  3. Try not to use credit or debit cards in the process of explaining money to your child. Use cash wherever possible so that your child understands that money is limited and needs to be spent wisely.
  4. In the beginning, your child is bound to make hasty decisions, pick a cheap toy and overpay for it. Or buy 2 of the same things they already have. Let this be a learning for them and bite down your urge to say “I told you so!”
  5. In the process of helping them make some extra money, hope they don’t offer to give you a haircut for a fee. :D


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