#raisingcapablechildren: F is for Financially Aware

On day 6 of the #blogchatterA2Z challenge, I want to talk about a life skill which is becoming more and more important in today’s context and one that I believe even many adults do not have. So today, F is for Financial Awareness. I think it is very important to raise awareness of children about money and finance. And one can start even with toddlers – basically as soon as they can count!

Some of you may believe that money is a grown up thing, but let me assure you this is not true. The foundations of good money management can be and should be laid in childhood. By discussing money, we teach children how to prioritise and value things, imbibe good financial behaviors such as saving up or spending cautiously and also avoid instant gratification. It helps them understand the meaning of earning, spending and saving, and budgeting. It also helps children understand the value of money at an early age and help them make better financial decisions. Talking about money is good parenting and as Ron Lieber believes, it helps us raise grounded kids.

Below am sharing some tips for raising financially aware children:

  1. Explain the concept of money: children as young as 3-4 can easily start understanding the concept of money. They will notice that one needs money to buy things every time they go to the market with you. You can explain that one has to earn money by working somewhere or by running a business. Tell them why mumma and daddy need to go to work and show them how others earn – starting from your domestic help to the nanny to school teachers and bus drivers. Show them various denominations of money and help them count. You can also start pointing out that some things cost more and some less.
  2. Differentiate between needs and wants: it is good to start differentiating these as early as possible. While you are out shopping you could point the essential things vs. those that are not. In fact, the difference will be easier to explain during these COVID-19 lockdown days, when only essentials are available! But humour aside, you can discuss things like whether a cold drink is essential or milk or whether a fruit is essential or candy (I am sure your answers will differ!)
  3. Prioritising expenses and comparing prices: let your children understand that there is a finite amount of money that can be spent. Slightly older ones can learn to prioritise their needs. You can also teach them to compare prices. If they are able to get similar products at cheaper prices, you can either buy more things or save more.
  4. Teach them about the concept of saving:  buy a small piggy bank for your kids. Even if you don’t give them pocket money, they would be surely receiving money as gifts on various occasions. Tell them that when they are able to collect a good amount of money, they can buy something good. This will also help children in delaying gratification and learning to be patient. Check out this link for some more ideas on this.
  5. Give pocket money: at an age you consider appropriate, introduce the concept of pocket money. (I started my son’s allowance last year, when he was 9). It is a very good way to let children learn about handling money. I give weekly pocket money to my son and we maintain a small notebook. It records all income and expenses. At the end of the month, we calculate some interest on savings as well. It has been going pretty well and for some of his demands, I have just told him to buy from his pocket money. And I was pleasantly surprised when he decided to save up for his LEGO toys rather than asking me.
  6. Financial goals: of course children are too young to have financial goals like ours, but one can easily introduce the concept. I remember when my sister and I wanted cycles, we put in place the occasion when we wanted the cycles and then started saving up for that. Encourage them to save up for something they really want.
  7. Open savings account: I had my first savings account when I was eight. I still remember the thrill of going to the bank and opening my account and giving my signature specimen made me feel so important! Use a savings account to explain the concepts of simple interest and compound interest. Today there are many more financial instruments such as credit and debit cards, online wallets and it is important to start giving a feel of these to children as they grow older. Classic games such as monopoly have moved up from paper currency to electronic banking!
  8. Explain the concepts of debt and investment: by the time children are in their teens one can start explain the concept of loans, investments etc. Tell them about larger financial goals – the first of those being their higher studies. Talk about saving for key milestones in life as also retirement (I know its too far in the future for them to fathom!) Also talk about the concept of creating an emergency fund. You can also take the time to warn them about the various cyber and other frauds that they can fall for.
  9. Using games to explain real world concepts: when my son joined his new school last year, I was pleased to hear about the concept of scholar dollars. There are certain tasks that need to be done in class (example keeping away chairs, putting books in place etc.) and their class teacher defined various jobs according to the required tasks. Kids then applied for the positions they were interested in, explaining why they should get the job and then were interviewed. Some jobs pay less than others. So kids get paid weekly in “scholar dollars”. They also get rewarded scholar dollars on timely submission of assignments etc. they can use their dollars to buy treats etc. from their teacher and once a term, they have a scholar dollar sale, where kids bring stuff to sell. The currency used is their scholar dollars. I found this a great concept to teach children about earning and spending money.
  10. Understanding different financial status: very soon children will realise that there are people who are more affluent than them and there are those who may be poorer. It is important that children understand what they can afford and what they cannot. Family’s wealth should not be equated to one’s worth or confidence. If they are not as well off as their friends, be careful that an inferiority complex does not develop. Similarly, if they belong to an affluent family a sense of superiority needs to be avoided and a show of wealth should be a definite no. Teens typically get into brand worship which very quickly becomes a game of one upmanship.

At the end I believe some of these tips will help you get your child ready for the real world and help them operate within it in the best possible way.


Read more from this series:

Read my other blogs on the series here:

Theme reveal

A is for Aiming High

B is for Being Brave

C is for Courage of Conviction

D is for Discipline

E is for Empathy


  1. Financial awareness in kids is becoming today’s need. With tons of options available in market and online shopping handy, kids also know that everything is easily available on Amazon. Its just one click and they will get what they want. Explaining them simple things in simple language is very important. The first step is to make them understand the difference between needs and wants.

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