In today’s times, parents have the added responsibility of empowering their children with financial literacy skills. They must help kids understand the concepts of earning, budgeting, saving and investing, starting from a young age. In a way, parents can pave the way for their child’s lifelong financial success. Beyond meeting educational needs, parents need to instil a sense of financial responsibility in their kids from early on so that they can confidently navigate the complexities of personal finance later in their lives.

For parents, teaching their kids about money, saving and investing might seem overwhelming at times. But knowing when and how to start teaching your child about money and investing can make a big difference in their financial future.

Start early and make learning fun

Starting early is key to laying a strong foundation for kids’ financial future. The sooner they are given financial literacy training, the more they stand to gain in the long run. As a parent, you can make learning about money more enjoyable for kids by incorporating games or creating a pretend store where they can practice budgeting and decision-making. You can also use real-life examples to show how personal finance concepts apply to everyday life. Remember that, you need to make it easier for them to grasp and retain information. Also, as a parent you should lead by example and demonstrate to them good financial habits and decision-making. They will look at you as a role model while navigating their own financial journey in their lives.

Also read: Key to long-term investing: ‘Time in the market’ more important than ‘timing the market’

Here are examples of age groups during which children can learn financial literacy, ensuring their financial success:

Preschool (Ages 3-5): Parents can introduce to their children basic concepts like identifying coins and bills. Make them distinguish between needs and wants, and teach your kids the importance of saving through fun activities and games.

Elementary school (Ages 6-12): In this age group, you can teach children how money is earned. Explain to them about savings and other financial goals. Encourage them to save money.

Teen years (Ages 13-19): As they mature and reach this age group, help them expand their financial knowledge by introducing concepts like budgeting and investing. Explain to them how the credit system works and teach them about informed purchasing decisions. You can also encourage them to open a savings account and start investing.

Engaging and age-appropriate methods for parents

Tushar Bopche, Co-Founder and Head of Strategy, Invest4edu, suggests some engaging and age-appropriate methods parents can use to introduce basic financial concepts to young children, such as the value of money, saving and budgeting.

Some of the ways parents can engage children, according to him, are:

Buying a piggy bank and challenging them to save enough money (simple ten or twenty rupees a time) to buy their next toy or the next book will do the trick. It will help them understand the importance of saving in meeting life-goals later in life.

Children can be encouraged to use money jars to learn budgeting and allocating, he said. “Ask them to plan and put a certain percentage of their savings into different jars labeled emergency, expenses, and savings.”

Take them to the market and ask them to buy a real item on their own; while you will be guiding them, let them buy the item, hand over the money, and get the change back, Bopche suggested. It will help them with calculations, and boost their confidence, he added.

Bopche also shared tips on how parents can effectively balance the need to educate children about money management while also instilling values like generosity and responsibility in their financial decisions.

He said that as a parent you should start with sincere discussion about money management as a family and include children in the conversation, and let them share their opinion. Secondly, create scenarios where they have to pay, save, and help a friend in need on a fixed budget, he further said.

“For making them responsible, always give them chores such as cleaning the cupboard, taking care of the household plants, or doing the dishes. The rewards that come after work is the only way children understand the value of money.”

As children grow older, you need to deploy some progressive strategies parents can use to deepen their understanding of complex financial topics such as investing, debt management, and financial independence, Bopche stressed.

Communication and conversations are critical to help children become responsible in money matters, he said.

“Value their opinion and always explain how expenses and savings work in your house. Gradually give them more responsibilities; begin with buying grocery items and move up on to planning future educational expenses. For young adults and college kids, encourage them to plan their life 10 years ahead,” Bopche advises parents.

“A wonderful exercise is to ask them to Plan a Perfect Day. Ask them what they want to be doing that day, where and how. Then ask them how they can achieve that perfect day in the future if they begin financially preparing for it now. Parents can also motivate older kids to take part-time jobs or internships to gain real-world experience while earning,” he added.