Money Matters: Be the teacher your child needs for financial success

Teach your kids financial responsibility by giving them a regular allowance and helping them create a simple budget.

As parents, we are our children’s first teachers — from helping them read and write to navigating life — we lay the groundwork for them but one of the most enduring lessons we can impart is managing money wisely.

In a world of financial complexity, parents have a unique opportunity to be their child’s most trusted teacher in the world of personal finance.

From encouraging “piggy bank” savings to explaining the details of budgeting for festivals or understanding UPI transactions, parents can turn everyday moments into powerful financial lessons. Being your child’s personal finance teacher means equipping them with the wisdom to make sound decisions.

Here’s how you can inculcate financial confidence in your children.

Budgeting and spending

Teach your kids financial responsibility by giving them a regular allowance and helping them create a simple budget. Allocate their money into three jars: spend for daily expenses, save for future goals and give for charity or gifts.

"To track expenses and understand money management, children should be introduced to budgeting apps or spreadsheets," says Gaurav Goel, a SEBI-registered investment adviser. These tools enable them to visualise their spending habits and review expenditures at month-end, fostering financial awareness and responsible decision-making.

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Introduce banking products

Educate your child about banking basics like fixed deposits, recurring deposits and interest rates to instil saving habits and understanding of compound interest.

Introduce them to UPI for secure payments under parental supervision. Teach them the difference between debit and credit cards, highlighting the risks of overspending and late payments.

Priyal Shah, a senior faculty for the FinCHAMPS programme run by BrightCHAMPS, a firm that conducts financial literacy, coding and robotics sessions for kids, suggests teaching kids about credit card interest fees and the consequences of missed payments to help them develop budgeting skills.

It's also essential to stress PIN security and warn them about phone scams targeting sensitive information such as CVV, PIN and OTPs.

Let kids make small, supervised purchases with a credit or debit card and review the statement with them to teach them how to track their spending, advises Goel.

Avoiding the debt trap

Teaching kids to live within their means is crucial for financial well-being. Explain how excessive debt can harm their financial life and educate older kids about the risks of credit card debt and personal loans. Encouraging savings habits helps them build a corpus and avoid debt.

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Learning through games and workshops

Parents use interactive tools like board games (Monopoly, The Allowance Game) and financial literacy camps to teach kids money management, personal finance and economic principles. These hands-on approaches promote financial awareness, responsible habits, and critical thinking skills.

Creating awareness around financial frauds

Children's online activities can expose them to fraudsters who may trick them into sharing personal information. Parents must discuss financial fraud with children, as cybersecurity threats like fake deals and phishing messages are prevalent online, posing significant risks to the younger generation.

During family time, parents should have open discussions with their children, sharing real-life examples of fraud and teaching them how to verify trustworthy websites and accounts.