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5 Personal Finance Lessons to Teach Your Kids


Every parent wants the best for their child. The process begins with building strong foundations so that they can lead a fulfilling and happy life. The fundamental values that every parent teaches their children are being responsible, disciplined, careful, and kind. Nowhere do we teach them anything about personal finance or personal financial planning!

Money is something we need to lead a secure life. Still, we tend to ignore talking with kids about this crucial part of one’s life. Undoubtedly, being careful, responsible, and disciplined are essential traits parents want their children to have. It is equally important to teach children the basics of personal finance.

Observing what others do helps children learn. That’s social learning. In the traditional classroom, kids are taught science and math. Personal financial planning, however, is rarely taught in regular classes or the general curriculum.

It is essential to teach kids about money right from childhood because of its real-world importance. Your child can acquire a proper understanding of the importance of money at an early age by being taught financial literacy. 

This article focuses on the top 5 timeless personal finance lessons you should teach your child. Let’s begin.

Be mindful of your expenses

It is crucial to distinguish between wants and needs. Your children will learn how to make smart financial decisions by understanding this difference.

It is difficult for children to understand that they do not need to buy a new video game or a costly pair of shoes. You have to be disciplined to resist immediate gratification. As it is challenging to deny children small joys, you may want to offer trade-offs instead—like buying the fancy pencil box would mean a smaller color pencil set—and let them choose what they would like to have more of. Children will learn that they may not always need what they want through regular interventions and explanations. 

In due course, this will help them become rational spenders. It is essential, however, that they learn this lesson, which will make a significant difference in their lives. It’s important to question every purchase and find a balance between what you want and what you need. Educating our children about the value of money will help them make better financial decisions today and in the future.

Don’t compare wealth 

Parents should always tell their children that no matter how well they are doing, there will always be someone who has more than they do. When trying to compete with your neighbor or a friend, you are most likely to spend more than you can afford.

People are oversharing everything on social media, affecting their financial habits. It is essential to teach your children that keeping up with their peers or social media stars could set them back in the long run if they give into FOMO (fear of missing out).

Prioritise investing over spending

They understand that investing before spending is the next step once our children understand how to live below their means. Show your child the value and rewards of saving money, whether they earn their first allowance or start their first job.

Do you remember the excitement of watching our piggy bank fill with coins or our bank account grow to save up for something we wanted? 

Once your children have begun to understand the value of money, take them to the next level by showing them how money can grow when managed well. Here you can explain how investments differ from savings and how they work. By introducing children to such ideas at an early age, they can become more aware of managing their money and understand the importance of investing. You can start by discussing with them how money grows in simple financial products like fixed deposits.

A child who spends before investing will only reach long-term financial goals, such as saving for a bike, a first car, college tuition, or a home. Hence, every parent should teach their kids this golden rule of personal finance.

Stay away from bad-debt

Your children may need some debt, like mortgages and student loans, but you should teach them how to manage debt and avoid “bad debt” for depreciating assets such as cars or smartphones. Otherwise, they might keep paying for something long after its useful life has passed.

If children take on debt, they should keep spending under control with a clearly defined budget. Whenever possible, pay off your credit cards in full each month. If possible, aim to pay off student loans early and the mortgage within 15 years.

The value of money decreases

 As a child reaches the age of 14–15, they should be taught about the loss in value of money over time. This is a crucial lesson in personal finance planning. You might have been able to give examples of how much things cost you on a daily basis when you were their age.You can compare the cost of a pencil from 30 years ago with what it costs now, for example. Show them illustrations showing how much a pencil costs Re.1 The cost back then and now is Rs. 5, which is a five-fold price increase. As a result, children may also become curious about past prices. Through such discussions, they would learn how money loses value year after year, making things costlier.


Parents can set their children up for a bright financial future by making saving a routine. Developing healthy habits at a young age makes children more likely to have fewer financial difficulties as adults than those who don’t have such a background.

Remember, personal finances and financial planning play an essential role in a family’s economic well-being. Children who are taught the basics of finances will certainly behave better in the future. When your children make financial decisions on their own, you will not always be there to guide them. In such situations, a child’s learning from an early age will be beneficial and give them a sense of confidence and empowerment. You can also visit Piramal Finance for more.