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Two schools of thought exist on this question. Parents belonging to the old school of thought feel that children should not be spoken about money, spending etc as they do not want their children to feel that money is scarce. Sometimes, parents often feel that this is not an important enough subject to spend time on and tend to ignore it.

The new school of thought believes that children should be spoken & taught about money. We advocate the same school of thought. Parents must proactively discuss about money with children, both formally & informally.

Children learn about money from an early age through observations & other actions. For eg: if parents are discussing the idea of buying a television and how they need to put together a certain amount of money for the same, the child will register involuntarily that unlimited money is not available. To augment this involuntary learning, parents can plan learning activities in the day-to-day life of children. For eg: be wise when giving gifts to your child. No matter how wealthy you may be; exercise restraint is fulfilling all desires of your child. Probably, link gifts to an occasion- birthday; holiday, academic or sports excellence. This will make the child not only appreciate the gifts they receives but also make them understand the value of money.

The concept of moderation & discipline can be taught in ways more than one. For eg: if the child is going to hostel, parents should sit down and make the list of clothes, shoes, books etc that are needed for the child. The child must be made aware that the list is finite and cannot increase based on impulsive likes in the stores. Once key decisions are taken, children should be given the flexibility of choosing from the variety available.

Parents tend to formally discuss money with children when the child grows big enough to demand pocket money. When parents talk to children about money, they need to think like the child. When parents are explaining why a certain amount of pocket money will be given to the child, they also need to explain to him/her why the amount cannot be higher/ lower. And this needs to be explained in a way that fits the child's life stage. For eg: if your 7 year old son desires a monthly pocket money of Rs. 500 while you believe that the amount should be Rs.200, then you need to logically & patiently explain why he should spend only Rs.200. It is important to learn to say 'no' to the child yet not impose ones views unilaterally.

Most often, our understanding of money is linked to what we were taught as children, our family values, beliefs & experiences. And hence when we talk about money to our children, we in a way transfer our values & belief systems to them. For eg: if we have been taught that we must save 25% of the total income, we instill the same discipline in our kids when we give them pocket money, however small the amount may be!

Teaching children about money has manifold repercussions:

When parents openly talk about money, they encourage children to be honest and openly discuss money issues. Once children start getting pocket money, and they are aware that they can discuss monetary issues with parents, they are more likely to open express their monetary problems and seek help.
A sense of discipline is instilled in children when they hear about the importance of money and the hard-work that goes into earning money. They are more discerning in spending their own fixed' pocket money' or even asking parents for extra money.
When children understand the value of money and are regularly given a certain amount as 'pocket money', it helps instill a sense of financial independence in the child.
Over a period of financial independence, children understand the concept of regular & planned saving. For e.g. given that they have a fixed amount of money every month, they will need to save a certain amount regularly in case they want to buy a gift for someone.
Talking about money helps them understand the various aspects of money. Children tend to understand how it is important to buy gifts for their loved ones using money but those gifts cannot substitute display of love through actions & words.
Parents who teach their children about money- management skills from an early age help them become financially responsible adults with a strong set of family values & beliefs and decision making capabilities.

Actually, we are asking a wrong question! We should ask ourselves ‘ when is it the right time to introduce children to money?’