How parents can lead by example in financial preparedness and safety for their children


Children are fundamentally social learners. Much of their values, knowledge, attitudes and behaviors are built by observing and participating in exercises with parents, teachers and peers. Among other skills, a great opportunity for parents to use the behavioral approach as a tool is to reinforce good money management skills.

To do this, parents themselves must initiate and maintain role models that will encourage positive financial habits in children.

Here are some ways parents can lead by example …

Instill a habit of saving

Using a savings pot or piggy bank is a great way to get kids started on their savings journey. Encourage them to put aside a little each time they have extra cash.

Children who are very young may not understand the value of money, but over time they will be excited to see the number of coins or banknotes increase. This lets them know that money grows when you keep it safe.

Teach them the value of money

Make a firm allocation plan for your kids and let them know that’s all the money they’ll get, and it’s up to them to manage it. If they want more, they should earn it through housework or by taking part-time concerts.

Personal finances are all about smart decision making and sometimes deferred gratification. Slowly, but surely, they will learn to make better decisions, as long as you don’t give in to their demands.

Include children in financial decision making

Having financial discussions behind closed doors robs children of the experience of having a voice and being heard. It is important to include them in the decision-making process, especially with regard to the financial objectives that affect them.

It could be how to manage the costs of extra-curricular activities, their higher education or even family vacations.

Giving them ownership of their goals can instill in them good habits based on understanding the value of money and hard work, as well as appreciating the efforts that parents put into caring for children.

Develop their budgeting skills

The ability to plan and carry out a budget will be of great benefit to children as adults. Show them how you save and plan for basic household expenses such as groceries and utilities. Help them identify their recurring discretionary expenses and budget after factoring in their income from allowances and household chores.

It’s also a good time to get them started on their investment journey by allocating some of their savings to a “growth” pot.

Help children understand the basics of banking

The ability to manage their own banking and financial operations will help children develop both their money management and their interpersonal skills. Let them periodically accompany you to the bank and see how the banking transactions go.

During different visits, help them learn about cash and check deposits and withdrawals, how the various application forms are completed, what term deposits mean and displayed exchange rates, how to make deposits. ATM transactions, how to write a check, etc.

Gradually let them handle their own basic banking transactions and transfer savings from a piggy bank to a real account. Teach them safe practices for using debit cards and online banking platforms. Encourage them to make deposits and withdrawals from their account, which will further help them see the effects of their saving and spending habits.

Introduce them to investments

Encourage adolescents and young adults to invest their savings, allowances or incentives in the investment products that make them up rather than spending them on “wants”.

Recurring deposits or mutual fund SIPs have a very low investment threshold and can be a good starting point for the investment world.

Before investing in direct stocks, they can test the waters by creating a notional portfolio through certain apps. Help kids understand how to make smart investment choices, assess risk-return metrics, appreciate the value of capitalization and more. You can even incentivize the amount invested by your children, which can turn into a substantial body of work by the time they become adults.


Instilling good financial habits is a process that evolves as children grow and learn. It is important that you practice what you preach and that you preach consistently. With strong, consistent communication and positive reinforcement about money, you will raise children who are required to manage their finances responsibly.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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