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How To Teach Financial Literacy to Kids

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Every parent wants their children to reach their full potential and become the best version of themselves. We long for them to lead confident lives filled with joy and without any unnecessary burdens. It’s natural to feel a bit anxious about their future. With the constant barrage of doom and gloom in the news, the soaring cost of living, increasing rent and property prices, and an increasingly competitive world, the challenges they’ll face seem daunting. In order to thrive, kids need more than just good grades, they need financial smarts for adulthood.

Keeping that in mind, teaching financial literacy to children with the guidance of a skilled financial advisor is not just helpful, it’s essential. Many of the values and habits that shape a person’s financial future are formed in the early stages of life. During this period, children look up to their parents as role models and often imitate their habits. In this blog, we’ll delve into everything about financial literacy for kids, from getting started and teaching lessons that last to leading by example and preparing them for the real world.

Lay a Strong Foundation

Foundations for many core values such as responsibility, patience, discipline, and self-control are laid early on. These values play a huge role in the long-term financial success of a child. One must ensure these values are nurtured and reinforced through building positive habits. You may have heard the saying “Child is father of the man”. The phrase tells us about the importance of childhood experiences and upbringing, and how a child is the product of said experiences. 

This early stage plays a massive role in shaping one’s future behaviours and attitudes, including those towards money and finances. Good habits such as saving regularly, differentiating needs from wants, and setting small financial goals should be instilled early on to promote financial literacy and responsibility. Let’s take an example.

Kids have a knack for persuading their parents to buy new toys and candies for them. We should know, we’ve been guilty of the same with our own parents! While it feels amazing to witness their joyful faces when their wishes get fulfilled, remember that it’s a tricky road to navigate. If we grant their every wish, we might make them expect instant gratification. If children get whatever they want any time they want, that can lead to impulsive spending in the future. 

It’s much easier for us today to satisfy our urges than it was for our parents. If we feel like eating a burger or buying a new dress, we can order online and satisfy our urges in a matter of minutes. Things will likely only get more convenient for our children. If we curb their urge to indulge in every whim and fancy now, we can help them develop patience, resilience, and a healthier relationship with money in the long run.

Also Read: How to Build & Plan Funds for a Child’s Higher Education

Make it Practical and Engaging

If you make financial concepts practical and more interactive, you’ll make the lessons more effective. For example, you can give your child a gullak or piggy bank, and start teaching them about saving money. 

As they grow older, it’s important to adapt and teach them age-appropriate financial literacy for students. When they start to get a hang of basic mathematical operations, start asking them fun questions like totalling the prices of groceries. Playing games like Monopoly is also very beneficial as it teaches valuable lessons about money management, budgeting, investing, debt, and strategic decision-making. When your children reach a certain age, you can start giving them pocket money. Such allowances play a big role in shaping their understanding of earning, saving, and spending responsibly. 

Observe what they do with their money and ask them why they did what they did. Many valuable lessons can be learned from these discussions, such as the importance of budgeting and prioritising long-term goals over instant gratification. You can teach them that they can either use their weekly pocket money to buy a few chocolates now or save it for five weeks to get an expensive new toy. You can even encourage them to write down how much they spent and on what. This helps them track their spending and understand where their money goes. It may be a simple thing, but it’s a very effective way to instil awareness and responsibility regarding their finances from an early age.

Lead by Example

Children are also a reflection of the values and behaviours they observe in their parents. You are your children’s hero and their role model. To make sure your child is financially responsible, you must demonstrate wise financial habits yourself. Let’s see a few examples of how you can do so:

  • You can teach your kids a lot when you go shopping. When you are comparing grocery items, involve them in the process. Explain how some items may be cheaper but have less weight, while others may cost more but offer more value because they have a larger quantity. You can also explain that even if the larger item is more cost-effective, you don’t have to buy it just because it offers more value, as you may not need it in bulk.
  • Shopping at sales is also a wonderful teaching opportunity. Discuss with your children how sales and discounts can be tempting, but it’s important to only buy what they truly need to avoid unnecessary spending. Sales can sometimes pressure people into purchasing items they don’t need, so you can teach them about the difference between wants and needs. 
  • When you are making payments at the market, demonstrate the process. If you are paying with cash, show them how you can quickly calculate and count the change. If you are using cards or UPI, you can emphasise the importance of security, such as always hiding the PIN when entering it. 
  • Take your children along when you visit the bank or ATM, so they understand how money is withdrawn and managed responsibly. 
  • You can involve your kids in the budgeting process so you can demonstrate the importance of managing money wisely and living within the means.

Incorporate Real-life Experiences

Another effective method for teaching financial literacy to youth is by sharing real-life experiences. For example, if you’ve purchased a car or a home on EMI, share the planning process with them. Explain how you budgeted to save money for the down payment, where you invested your savings, and how you calculated the time needed to accumulate the down payment amount. Then, you can relate this example to something relevant to them. Suppose your child wants to buy an expensive cricket kit. 

You can help them calculate how much they can regularly save from their weekly or monthly allowance and estimate how long it will take them to save up for the kit. You can also help them compare different cricket kits in terms of prices, features, and quality so they can make an informed decision on their own.

It’s also important to teach your kids about overcoming mistakes. Teaching kids to learn from their mistakes is not only good for their financial well-being but for their overall growth. Children, especially pre-teens, often believe their parents can do no wrong. And we all know that isn’t true. It’s important to convey that everyone is prone to mistakes, and what truly matters is what lessons they took from them and how they bounced back. 

Share examples of your own financial mistakes with them, how you recognized you were making a mistake, and the steps you took to rectify it. As they grow older, they will inevitably make financial mistakes themselves. They may blindly invest in the stock market just because a friend said so, or accumulate excessive debt. Their ability to bounce back effectively will depend on how quickly they acknowledge their mistakes and take action to correct them.

Also Read: How is a Child Education Plan Beneficial

Foster Financial Confidence and Independence

As your children grow older, it’s important to slowly introduce them to more advanced financial concepts. Give them a basic understanding of concepts such as banking, insurance, debt, loans, emergency funds, investing, and the importance of financial planning.

  • For example, you can use the classic growing tree analogy to explain investing. Investing is like planting a seed. Over time, with proper care and attention, that seed grows into a strong and healthy tree. Similarly, when you invest your money wisely and allow it to grow through compound interest, it has the potential to grow into a big sum over time.
  • You can teach them about banking concepts, including different types of accounts, how cheques and UPI payments work, and the importance of safeguarding sensitive information like passwords, OTPs, and login information. Help them open a bank account as they get older to familiarise them with saving and managing finances responsibly. These are practical experiences, and practical experiences are the most helpful in the development of financial skills and habits for the future.
  • You can also explain credit cards and debt. Give them an idea about how responsible use of credit cards can lead to a good credit score, while misuse can lead to debt. Put an emphasis on the importance of living within one’s means and avoiding debt.
  • You can discuss the importance of maintaining an emergency fund. It’s like having a spare tire in a car for unexpected situations.
  • You may also want to introduce the concepts of health and life insurance. Explain their purpose in providing financial protection against unforeseen events.
  • You should encourage them to explore finance-related articles and videos to get a basic understanding of concepts such as inflation, taxes, and supply and demand.
  • Tell your children that all these elements are part of financial planning. Stress how important it is to plan ahead to remain prepared for life’s challenges. 

The more your kids understand, the more confident they will become. In time when they start earning and have their financial plan in place, they will start to feel independent and secure about their future. 

Also Read: How to Achieve Financial Independence Early?


In the words of Benjamin Franklin, “An investment in knowledge pays the best interest.” In this day and age, the importance of financial literacy cannot be overstated. We must empower our kids with the knowledge and skills to tread the complicated world of finance confidently. Teach them about savings, budgeting, and investing. This will in turn make them more responsible, disciplined, and patient – three extremely important skills for financial success. So start early, keep learning fun and practical, use real-life examples, and be a good role model. As your children grow older, the knowledge you impart will serve as a solid foundation for their fruitful financial journey. 


How do I teach basic financial literacy?

You can start teaching your child about financial literacy as soon as they start learning basic maths. Give them simple problems to solve while you’re out grocery shopping with them. You can play games such as Monopoly, tell them about your own financial experiences, ask them to sit beside you when you are budgeting and encourage them to read about simple finance topics like inflation as they grow older. There are many ways to make your child financially responsible. 

What are the concepts of financial literacy for kids?

By teaching your kids about financial literacy, you can introduce concepts such as budgeting, regularly saving, setting small financial goals, living within the means, differentiating between essential and non-essential expenses, investing, and the importance of planning in advance. 

How do you teach basic money skills?

You can start teaching your child basic money skills through different activities such as giving them a gullak to collect money, playing games like Monopoly, giving them pocket money, and doing simple maths problems with them as they begin understanding basic operations. As they grow older you can start involving them in family decisions, encourage them to read about financial topics like investing and taxes, and show them how you handle your own finances.

Can financial literacy be taught?

Absolutely! In fact, the earlier you start teaching your child about finances, the better because it gives them more time to develop essential money management skills and habits like disciplined savings and budgeting. The sooner they learn these skills, the sooner they can start implementing them. Financial literacy helps them understand the value of money, teaches them the importance of living within their means, and makes them more financially responsible.