9 effective financial education tips for your Children

POSTED BY Jagoinvestor ON May 4, 2010 COMMENTS (52)

Do you want your children to be smart when it comes to Finance? Don’t you want them to learn all the things, which you’re learning today, from this blog & other resources? And that they don’t repeat the mistakes, we made in our lives?

Financial education of children

Financial Education for Children is as important as their regular education. Sadly, we do not have in our school curriculum. However, you can start teaching your children, the basics of money, so that they become, more aware, more responsible and think in a better way about finance.

It’ll not just help your children, but even you as a parent in many ways. Here, I present 9 things to teach your children.

How to save money

Most kids today are indulged, like never before. All they do, is spend. The money mostly comes from one of the parents. The kid asks you for a 100 bucks to buy the latest thingamajig, you question them why, they answer you, and you give them the money.

financial literacy child education

This generally, makes them believe that once they give you a “good enough” reason, the money’s in the bank (or their grubby li’l hands) 🙂 . You need to make sure, that kids understand how you save money. This will happen only, when they themselves, understand how to save money.

Hence, encourage savings.

Let them save some money for their little goals (even big ones’). If your kid wants to buy something, which you think can wait, encourage them to save towards its purchase. Whenever you give them some money for anything, ask them to save 25% of it for that goal.

Apart from this, you can give them some small amount weekly to save for that goal directly. Please buy a piggy bank for your children. You can buy a fancy one or the clay one we had in our days 🙂 It works!

How to keep track of money

You should teach your kids where the money at home comes from, where it goes and how much is saved. I’d ask them to maintain a simple table where they can write how much money they received, & when, from whom, & where it was spent.

These 4–5 things are good enough for a small child to start with. If you have a computer at home, you can make an excel sheet and ask your kid to maintain the account, while making sure, that things are very simple for the kid to understand. Don’t over do it 🙂

Once they start doing this exercise, they’ll gain an awareness of where they spend their money & to what extent. You can sit with them each quarter, and review the sheet. Don’t try to point what’s right or wrong. Just gently point out facts; that’s all.

How to pay what its worth for something

Have you ever faced a situation when your kid bought something and they were cheated & charged exorbitantly? Or demanded something from you, but they thought that it’s wasn’t that expensive?  Kids don’t always realize, just how much something costs. They just want it.

The best way to deal with this situation, would be to ask them upfront, what they think, is the price of something. If they demand a video game from you, they might not know how much it costs. So ask them, what they think is the price,  & what is the maximum they’d like to pay for it.

Many times, you will find that the price is much more than they themselves think. In which case, they might want to reconsider buying it.

My experience:

I remember, when I was young, my brother & I demanded a video game from my dad. He fobbed us off a couple of times, but later he asked us, “Pata bhi hai kitne ka aata hai?” (“Do you know how much it costs”) . We were puzzled, as we really didn’t know the cost.

financial education tips for children

We assumed it’d cost us something like a 1000 bucks, but we later found, that it actually sold for more than 3,000 at that time. Once we knew the price and compared it to the value it delivered, it didn’t make sense to buy the game. We had much better, healthier entertainment options.

And guess what? Dad bought us the game, next year! 😛

How to spend money wisely

Ask them their priorities, what they need this year, what their wishes are, and help them sort out their desires and their requirements. Ask them, what is more important? What’s secondary? This way, you encourage them to think in the right direction.

You are giving them an opportunity to understand difference between needs and wants. This might not be true for small kids below 10, but will be more relevant for children in between the ages of 10 & 18. Kids often times speak or figure out amazing things, which we adults don’t think about. Do this exercise and you might find, that your kid has real smarts!

Please share examples from real life if any 🙂 .

How to think about money

You should make sure that your child’s attitude towards money is shipshape; that they respect money, understand that it takes an effort to earn, and also understand the fact that, while money is important, it’s only secondary, as far as happiness & a content life are concerned.

Talk about money in front of them in a way, which gives them an appropriate view. Make sure, you don’t give them an impression that the family’s happiness isn’t as important as your job or business.  Read Personal Finance Mistakes

How to live on a budget

If you give your children pocket-money, make sure they live on it, the entire month and they do not come to you smack bang in the middle of month, asking for more, for things they could have managed with the same pocket-money.

This happens only when children deviate from their monthly needs and carelessly spend on what they don’t need. While, they may ask for more, because of some emergency need sometimes, over a long-term, you should make sure they stretch with that pocket-money.

Children will understand budgeting better, if you yourself practice it (ouch!). When they see how you allocate expenses each month, and stick to it, chances are, they will replicate it at their level. While, this whole thing can be tough initially, help them out, by giving them the extra money they need in first 2-3 months and then restricting gradually.

Watch this video to know how to raise a smart child about money:

How to invest

Start teaching your child, the different ways of investing. Teach them basic banking, how banks operate and what it means to earn interest on an amount. You can also buy them some games which teach investing. Ask them to deposit some amount with you and you can pay them interest per month.

When you give them pocket-money, say Rs.500 per month, ask them to deposit back Rs.250 with you, with the assurance that next month you will pay them 10% interest on that amount, i.e : Rs.275. Though you might be out-of-pocket by Rs 25, the knowledge you impart to them is priceless !

This Rs.25 gives them the important message, that saving their money and investing regularly can increase their money many times over.

When they start earning later in life, this gyan will be something, they respect you for! Also, don’t forget to open a bank account for your child as soon as they turn 12-13 yrs.

How to exercise the entrepreneurial spirit

Don’t tell me you want your children to do regular 9-5 jobs! Don’t you want to instill some entrepreneurial skills in your children right from start, so that they know what they want to do in life and take an initiative to work along those lines?

The first step:

First step is to talk about different ideas your children have. When they are small, they can have weird ideas, but listen to them, & ask them how they can make money from some idea. Ask them questions like “Can you think of some idea, using which, you can make money?”

My own brother who is 13 yrs old  makes weird stuff out of junk which can act like a toy gun! He once said, that if he can make 10 of those and sell at Rs 20 each, there will be many friends of his who will be ready to buy it. Though he didn’t do it, he surely has the right attitude.

You can encourage your child to do some random / different / creative stuff for a few hours every day (during vacations at least) and pay them extra money for it. This will help them earn some money and also help you do some work for which you wanted to pay someone!

If you have a garden, you can ask your child and his friends to do some random things for which you wanted to hire a guy anyway. This has some advantages; First – your children will understand, it’s not that easy to earn money and they have to work for it.

The second step:

Here, you will help your kids to spend some time constructively, which they would have spent playing or roaming around or playing video games. And finally, your money stays at home 🙂

Thinking a bit bigger, maybe you can really involve your child and his friends and work on some month-long project… one, that has a whole business plan, revenue model and which then earns money for 1 month (may be this can be done in summer holidays). Wow… this seems exciting, talk to your child about this today and see the response.

Ideas? Anyone?

How to handle credit

You should also start teaching your child, to handle credit.

If you pay them Rs 500 pocket-money and in the same month they demand Rs 200 extra, you can give them that money, but now introduce them a concept of “credit”. Tell them that it’s not going to be free and you are cutting Rs 50 for next 4 months from their pocket-money and paying them just Rs 450.

If you want to add some horror and suspense, make it 5 months (charge interest). This will make sure they ask for extra, only if they need to. Stick to this with discipline, and don’t fall for emotional atyachaar from your children,(they are really good at it, especially girls!)

The previous point’s example can also be used here. If you are making some small project for them from which they can earn money, loan them some seed money like Rs 1000-2000 (as a venture capitalist) and then demand the money back after 1 month with interest. (I come up with crazy thoughts at times 🙂 )


Teach your children basics of money from the very start. These tips will act as a foundation for your child’s financial education and they can build upon these learnings in the future. Most of these tips are for children, but can be used for your spouse, who may not be that good at personal finance. What say?

Comments, Can you also share your tips ? Do you think these tips will be helpful to your children? If no, then what are the obstacles?

52 replies on this article “9 effective financial education tips for your Children”

  1. Ram says:

    Nice article Manish, enjoyed it!

    1. K.A. Umamaheswaran says:

      Dear sir, It was a very nice article and i have started a piggy bank savings when children are become 5 years old. I used to keep Rs.1/-daily and my two children savings comes to around Rs:10,000/.- But in to days date children are demanding more money for buying the things and their expectations are going very high by comparing with their friends and their status. They will not understand the financial difficulties of their parents.To convince them is very difficult and if do not give the money their mind will go out of the way. In this stage what is your suggestions? I have come up in my life without parents support with a great difficulty with lot of family responsibilty. When i say this thing to some of my good friends my children are feeling shy and shouting on me and telling me that why y want to become cheap in front of others.Is there is any remedy to give them a proper answer in this?.

      Umamaheswaran iyer

      1. Truely speaking I have no solutions to this. It depends what all they have seen and grown with 🙂 .

  2. Mukesh Agarwal says:

    Hello Manish

    This is very good article and also useful for me as i will marry in a Year or Two. Keep on posting such good post.


    1. Nice .. I would be good to see more articles on term insurance and other child related planning articles on the blog


  3. Dominic says:

    I am looking for a simple PPT on Financial Planning for new recruits in our company. Someone point me to a presentation.


    1. Dominic

      Some thing from http://www.slideshare.net/manish.pucsd might help . which city ?


      1. Dominic says:

        Thanks Manish. I am from Chennai. First I thought of doing it myself later I have asked one from our accounts dept to do this presentation.

  4. saurabh says:

    your blog are really good.
    why dont you manage something like that:
    publish a monthly/bimonthly magazine/issue in hard copy form.
    people who want this can contrubute money towards it.
    you can also make money there by publishing ads…
    besides articles you can also publish the forums solved answers there.
    in all i am suggesting you to publish a personal finance magazine for those people who find time in months but dont want to miss those goodies.
    This thing will target another category of net users like me.

    1. Saurabh

      It will happen 🙂 . But later .. we need more time to get famous and money 🙂


  5. R M HEGDE says:

    article is very effective & useful,i have grandson,it helps me to educate him on money matter.

    1. RM

      Thanks for appreciation , i am sure if you apply these tips , he can have better Money mind .


  6. caribou says:

    This is great article. Which of the following investment scheme is good for childrens (period above 10 years):
    1. ULIP Childrens plan.
    2. Mutual Fund SIP equity diversified.
    3. MF SIP balanced fund
    4. Post office recurring deposit.
    Please answer me.

    1. caribou

      There is no one general answer to this . It will depend on your profile actually . If you are good at market movements then you can by a ULIP , if you dont want to track much and are consistent investor with moderate to high risk appetite, you can buy MF . and if you are a very low risk profile investor , you can buy PORD or Debt oriented funds , which is not recommended for long term goals .


      1. caribou says:

        Dear Manish,
        Following my friend’s advice, I bought SBI MF Magnum Balanced Fund with 1500 pm for my sons.

        Some people says the return might be too low, suggest me to purchase SIP in some diversified equity fund. I dont like pure debt. Will I continue? Can you suggest me?

        1. What are you comparing it with ?

          Its returns will definately will be low when compared with pure equity diversified fund , but then the risk will also be lower . I can see that since inception return for this fund stands at 20% , which is good return , however long term term , you can by pure equity funds .


          1. caribou says:

            Thank you, Manish. Thanks for your advice.
            Many times I visit your blog.

  7. Ramesh says:

    Simply Superb article Manish…your articles are make me more interested and my way of thinking towards spending money has drastically changed with your articles. My Savings habits changed a lot and also helping others in choosing things like Mututal Funds , ELSS and other savings options. Real kudoos to you… I am really a big fan of your articles.

    I have one suggestion. I feel we should encourage our kids to go for some part time jobs in after they +2 and degree in their vacation times (like in US). With this they find some different options in earning in their near future. Feel free to provide your valuable suggestions.

    I really appreciate for your work.

    1. Ramesh

      Thanks , I agree with you about some part time work for students . Its a great idea to make them learn .


  8. uchako says:

    I read some where on you blog that you do paid financial planning services. Can you let me know how much is teh charges and all .. I am intrested in getting it done by you . you can mail me in


    1. Mailed you


  9. Seetharam Bhat says:

    Hi, Followed your website from MINT, congrats for featuring in their papers.
    Nice posts must say, spent a really loooong time going thru the articles today.
    Have inculcated the savings habit in my daughter who is 4 yrs old by giving her a small amount daily and ensuring that it goes into the piggy bank, this is then banked into her account monthly. She knows that this money will help in getting her monthly Masala Dosa… 😉

    1. Seetharam

      Nice advice 🙂 from your side, we can give a fixed amount to child and then ask them to put that in piggy bank and then at the end of the month take them to bank and have them deposit the money themselves . This will make them understand Banking + Savings


  10. prasoon says:

    Hi Manish,

    Congrats on being featured in MINT. Your blog is really interactive with the tweets and stuff.

    I just came across this fixed deposit scheme offered by Mahindra Finance on Economic Times.com It says they offer 9+% on fixed deposits.

    Isnt this much higher than what banks are offering these days? How is this possible. They have a lead form at: http://www.mahindrafinancelms.net/campaigns/fd/
    It seems to have most info but I dont understand how they offer better than bank rates? Is it safe?

  11. Prasanth says:

    Hi Manish,

    Saw that Jagoinvestor was featured in Mint newspaper today. Congrats. Way to go man.

    1. Prashanth

      Thanks 🙂

  12. Abhishek Kapoor says:

    Can we design a course on entrepreneurship for kids? One step above the vocational training type?

    1. Abhishek

      Its a good idea . How do you think it can be turned into a course and start teaching , what is the good price for this ?


  13. Krishna says:

    Hi Manish,

    Congrats for featuring in Livemint’s Finanacial blog review. It is featured in today’s edition. I hope this is great news for you. I too inspired by your blog.


  14. Amit says:

    Congrats Manish! for your blog getting reviewed in Mint!
    Its awesome 🙂

  15. Pramod says:

    You are right Manish as everybody must teach the children about money but the biggest dilemma people face is how they will be treated back if they start talking about money.
    Our society treat Money as necessary evil with more stress on the evil so 9 out of 10 times a person is feared to be called Money minded or Kanjoos if they just try to stick to a discipline of Budget within their family. So many parents just avoid asking their kids how they spend money for the sake of their image.
    We have always thought money as a bad thing which must not be discussed (Mard se uski kamaai aur aurat se Umar nahin Poochte 🙂 ). In our films Rich has always been a villain but things have to be changed. I still wonder that rather than showing hero taking a loan from money lender and then becoming a Daku for revenge, why dont our films show that taking a loan to spend lavishly on your daughters wedding beyond your means is bad thing and the best solution to keep lala away.
    Secondly we always think that kids are not mature enough to talk about sex and money. (Often not knowing how smart they are 🙂 ). We must respect their senses and impart knowledge to them gradually. If you dont teach your kid about these things he will seek Pornography and Financial Pornography is much more dangerous. Can we compare “double your money schemes in one year” with Pr*******tes in the world of finance.
    So every parent has to cross these mental blocks and take up this duty to empower their kids to face the real world.

    1. Pramod

      Good point . “Secondly we always think that kids are not mature enough to talk about sex and money.” , this is a good point to discuss, just because we dont talk about these things openly , children mess up both these , money problems are not smaller then than other one 🙂 .


  16. A very nice article… I hope that none of the today’s smart kids’ read it…. And not answer their parents back… “Mom, I also read Jagoinvestor” 😉

    1. hehe .. That was funny 🙂

  17. Kavita says:


    Very nice article, i shall implement the points when the time comes, at present my children are really young 2 and 5. Tgh i have piggy banks at home they think it is a toy. But i shall take care that they are taught about money matters early in life. As of now, i show them the various notes, coins with denominations etc. For my 5 year old whenever we go shopping for his toys then i tell him what is the price whether it is worth it etc…..
    I have saved your article, will need it in a few years.

    Thank you

    1. Kavita

      Nice to hear that . Make sure you start teaching them early as your said , because later we loose the sight .


  18. ANUJ says:


    Nice Post… but would like to know how to calculate an optimum amount for the pocket money… should it be based on speculation or feedback system…

    1. Anuj

      Interesting question !! . How to calculate optimum amount for pocket money. The best way I can think of is to ask the kid itself what are their requirements other than the regular things they get at home , and then see if that fits your thinking or not .

      Do others have any ideas ?


      1. Pavan says:

        I think rather then asking the kid the parents should themselves decide what all things would the child require and decide his pocket money. I liked the idea of keeping a track of their spendings through excel. Also, based on the spending the parents would be able to change the amount of pocket money.

        I guess the pocket money would depend on age of the child, income of the family, things that are provided by the family and what all needs to be purchased by the child, friend circle of the child, etc…

        1. Pavan

          Yea , but asking kid himself means that he knows upfront whats going to come his way .


  19. NPR says:

    This is a good article. Pertinent, useful guidance. Thanks for taking the effort to write & sharing the same.

    1. NPR

      Do you have other ideas to implement on children ? are you married ?


  20. Kiran says:

    Nice blog

    1. Kiran

      thanks , would like to hear more views of yours on this topic .


  21. rajivahuja says:

    I wish I read this article when Iwas a child.Interesting piece of advice every youngster should follow.

    1. Rajiv

      Thanks 🙂 . Do you have any tips from your side ?


  22. Rakesh says:

    Excellent Post. Very good realife examples used.
    Keep up the good work.


    1. Rakesh

      Thanks 🙂

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