Rich or poor, big spenders or not, all Indian parents know that teaching children about money is one of the most critical skills we must inculcate in our children. As in many other cases, the earliest role models for children are parents. Here are some basic tips for Indian parents to practice so children can learn the right skills from them. More detailed strategies based on age groups are also available for further reading.
Here are the basic tips.
Talk openly to children about money
It is important to talk to children about money rather than dismiss their questions about it or tell them that they are "too young". This includes explaining clearly what money is, where it comes from, what it lets us do and buy etc., The earlier that children learn about the purpose and value of money, the easier it will be for them to appreciate money.
Tell them about the tradeoffs you make
We often make tradeoffs about what we are going to buy. Often our children are with us when we are shopping. They may ask why we did not buy something. Many a time, because of embarassment, we may tell our children "Oh, I didn't like it". Instead, use the opportunity to give them honest answers. Tell them "It was too expensive. I am trying to find something that is more in our budget".
Explain your spending
Children will see us spending money on various activities and objects. Explain to them what you are spending the money on and why. For example, if you go to a restaurant, talk about how the restaurant serves you good food in return for money. But also explain why you chose to come to a restaurant for that meal ("Mom needs a break", "We thought it would be nice to try Chinese food today" etc.,) so that children understand that it is a choice.
What you need vs. what you want
Help children differentiate between what they need and what they want. For example, when buying clothes, food, books etc., explain to them that these are essentials that must be bought. When buying toys etc., explain to them about things that you want, that you have to adjust to fit within a budget and can live without.
Don't buy everything that children ask for, immediately
While parents often feel that we should satisfy our children's needs to make them happy, satisfying every desire (even if we can afford it) of children will do more harm than good. Set limits and stick to them. Establish goals that children must achieve to "earn" a purchase.
Focus on saving
Emphasize the need for saving money by taking children to banks when you deposit money. Explain to them that you are doing this so you can take it out later when there is a need for it. PIggybanks are also a good way to teach children about saving money for the future.
Give to charity either by donating money or things and explain your actions to your children. Explain to them about poverty and lack of money. Have children participate in similar ways.
Allowances are a great tool
Giving children an allowance or "pocket money" is a good way to teach them the practical aspects of spending money while giving them a sense of control over it.
Educate children about advertising
Children are exposed to advertising everywhere they go. Read about how you can explain the purpose of advertising to your children.