How to Teach Your Kids About Money – Essential Financial Lessons for Children

Tara is 11. Lives in Pune. Loves telling stories. Every Sunday at her nani’s house, she gathers her little cousins and charges them ₹10 per story under the mango tree. Last month, she made ₹160 just like that—no startup, no Shark Tank pitch, just good old storytelling.

Her mom, Asha, noticed something cool—Tara wasn’t just spending that money on junk. She used her dad’s old phone to track it in a simple notes app and split it into three parts:

• ₹60 to spend on toffees and sketch pens
• ₹80 to save for a Kindle (she’s eyeing one that costs ₹7,000)
• ₹20 she donated to a nearby dog shelter

When Asha asked why she was doing this, Tara said, “Every ₹10 note has a story. I’m just collecting mine.”

No lectures. No financial planner. Just a kid picking up money smarts from real life—and that’s honestly where it all begins.

Bachpan Se Billionaire Mindset—Start Early, Start Right

Financial literacy starts young. According to, money habits are formed by age 7, so why wait? Start educating your children on basic things such as saving, sharing, and spending at a young age.

For example, Tara was saving pocket money by the time she was 5 years old. For every ₹20 she received, she divided it into three parts: ₹10 to be saved, ₹5 for a treat, and ₹5 for a donation. 

Asha had made it a habit of including Tara in her daily activities, such as grocery shopping. On one occasion, Tara was deciding between a snack that was ₹40 and a snack that was ₹50. Tara said, “I’ll get the ₹40 one ₹10 adds up!”

Tip: Use grocery shopping to help children learn about prices, totals, and choices. It's easy to start developing money habits like these.

Read More - Teaching Financial Literacy: Money Lessons for the Next Generation Costs

Piggy Bank 2.0—Make Pocket Money Digital

Physical piggy banks are cute, but digital wallets are the new normal. Apps like Fyp, Junio, and Akudo are gaining popularity with Gen Alpha, offering a gamified, safe, and educational way to manage money.

For example, Asha switched Tara’s allowance to a digital wallet, assigning ₹200 per week, with ₹50 set aside for savings. By the end of the month, Tara had saved ₹200 without even realising it.

By making pocket money digital, Tara learnt the value of saving while having fun. A small weekly allowance can add up quickly when managed through apps, making it easy for kids to track, save, and even set goals—all while staying engaged.

Ghar Ki Kirana, Finance Ka Gyaan—Involve Them in Home Budgeting

Turn routine tasks like grocery shopping and bill payments into real-time finance lessons. Asha made sure Tara was involved in household budgeting, teaching her how to manage expenses like a pro.

This is how they did it:

Distribution of Money for Groceries, Electricity, and Wi-Fi:

Asha allotted a monthly limit of ₹10,000 for home expenses altogether. They divided it into:

• ₹5,000 for groceries
• ₹2,000 for electricity
• ₹1,000 for Wi-Fi
• ₹2,000 for miscellaneous bills

Reading the Electricity Meter:

A month later, Asha asked Tara to estimate the electricity bill by reading the meter.

• The meter read 1,200 units consumed.
• Tara rapidly calculated the bill:
• 1,200 units × ₹7/unit = ₹8,400.

The actual bill was ₹8,500, only ₹100 higher than Tara's estimate!

Tracking Monthly Expenses Using Google Sheets:

Tara used to help Asha monitor the spending every week using Google Sheets, updating the figures and ensuring they didn't go over budget. For instance, by the end of the first week, they had spent

• ₹1,200 on food
• ₹500 on electricity
• ₹300 on Wi-Fi

At the end of the month, Tara could identify where the family's money was going and how they could make the next month's budget more efficient.

Chhoti Umar, Badi Soch—Teach Goal-Based Savings

Teaching Tara goal-based savings keeps her motivated and helps her understand the importance of planning for the future. By setting both short-term and long-term goals, Asha showed Tara how saving can turn dreams into reality.

This is how they did it:

Use visual trackers or apps like Goalwise Junior to make goal-based savings fun and motivating for your children.

Ye Paisa Kya Kehlata Hai? —Use Games and Stories to Explain Money

Money doesn’t have to be boring! Asha turned learning about money into a fun experience for Tara by using games, stories, and interactive apps.

This is how they did it:

Board Games:

• Asha introduced Tara to Monopoly, where they had to manage properties, pay rent, and save money. It helped Tara understand the concept of budgeting and decision-making.

• For example, Tara bought a house for ₹2,000 and had to pay ₹500 rent every time someone landed on her property. By the end of the game, she saw how saving and spending wisely affected her total wealth.

Stories:

• Asha told Tara the story of Dadi, who bought her first home by saving ₹500 a month.

• "Dadi didn’t have a lot of money, but she saved ₹500 every month for 5 years. By the end of 5 years, she had saved ₹30,000 to buy her first house!"

Apps:

• Tara loved using Khan Academy Kids and Kiddopia, which offered interactive finance lessons. In one of the app challenges, Tara had to save ₹50 to buy a virtual pet.

• Every time she saved ₹50 in the app, she unlocked a new pet, teaching her the value of setting small savings goals.

Needs vs Wants—Kya Zaroori Hai, Kya Fancy Hai?

It was a typical Sunday shopping trip when Tara spotted a glittery, sparkly diary at the billing counter.

"Mumma, can I purchase this? It's so pretty!" she asked, her eyes wide with excitement.

Asha smiled and sat down beside her, eyeing the diary with a smile. "Okay, let's play our little game—Need or Want?"

Tara hesitated. "Hmm… I already have two diaries at home."

"Right! Is it a zaroori need or a fancy want?" Asha asked.

"A fancy want," Tara sighed.

"Good call!" Asha high-fived her. "Now, let's ask the 3 magical questions:

1. Do I really need it?
2. Can I afford it right now?
3. Will I use it after 30 days?"

Together, they ended up buying toothpaste (a clear need) and skipping the diary. But Asha noted it on Tara’s “wishlist”, something they’d revisit next month if she still wanted it.

Lesson Unlocked: Differentiating between zaroori and lalach wala purchases builds mindful spending habits. Tara may not have bought the diary, but she walked out feeling like a budgeting boss.

EMI Ka ABCD—Simplifying Loans and Interest Early On

Loans and EMIs might sound like “grown-up talk”, but it’s never too early to teach your kids that borrowing money comes at a cost. 

For example, when Tara asked Asha if they could buy a new ₹50,000 phone on EMI, Asha used the moment to explain how interest works.

She broke it down like this:

“When you borrow money, you pay it back with extra paisa—that’s called interest. And EMI means you’re paying that total in small monthly chunks.”

Here’s how Asha showed Tara the real cost:

Tara’s takeaway?

“EMI = Easy Monthly Installments, but also Extra Money Included!”

Also Read - Best Savings Strategies for New Parents

Doston Ke Saath, Paisa Safe—How to Handle Peer Pressure

Tara’s Diary — Entry #17

Dear Diary,

Today, Meher came to school flashing her brand-new iPhone 16 Mini. Everyone crowded around her like she was some celeb! For a moment, I felt weird. My phone suddenly looked... ancient.

At lunch, I told Mumma about it. She didn’t say no or yes. She just asked, “Are you unhappy with your phone or just feeling left out?”

Honestly? I didn’t need a new phone. I just didn’t want to feel left behind.

Then she reminded me—my Kindle goal is just ₹2,000 away! That got me pumped again. iPhone can wait.