For most people the relationship with money starts early. Mine started when I was nearly eight, and in the third standard. Father believed that children so young should not handle money, and so I’d often pinch small change from his desk. One day, seated with the family at the dining table, some coins suddenly rolled out of my pocket and jingled merrily as they hit the floor. Caught, I was branded a little thief at home. In fact I believed I was one for what I’d been doing—until I grew up and understood why I was tempted to take money from Dad without his knowledge.
And what was that? Without any pocket money, I couldn’t buy sweets or marbles like the other kids at school. But, soon, all that changed. I was packed off to boarding school where everybody got a monthly allowance. The school had its own little plastic money in different colours (for different denominations) that all the boys could use on campus, where we were not allowed to keep real cash. These “chits” had no value outside the school, and so it also helped prevent the kids from “bunking” out. The chits got us sweets and snacks from the school’s tuck shop, even comics or
catapults from other boys who sold them. We spent, borrowed and lent the chits, lost and found them, gambled with them, saved them, and even exchanged unspent “chit for cash” with the school’s treasurer just before going home for the holidays. At times there were clandestine “chit for cash” deals too, with some boy or other who held some smuggled cash.
The best thing about all this was I learnt to handle money at a very young age. And for me, getting Rs15 a month—a tidy sum in 1961, when a 40-gm Cadbury chocolate bar cost just 25 paise; it’s Rs20 today—without anybody telling me what to do with the money was among the joys of boarding-school life. I also learnt to suffer losses and understand that debt caused heartaches. Decades later, it also helped me teach my own child about money values early without really trying hard.
But most children become adults with little or no financial literacy. And the old saying that “any fool can make money, but it takes a wise man to keep it” still holds true. Here are four ways to make your child understand money.

1. Set good examples.
If you, as parents, overspend to show off to the neighbours or friends, and don’t save much, don’t expect your child to grow up any differently. However wealthy you may be, make your child understand by example that money comes from hard work, and that it must never be wasted.
If you overspend at age 45 or 50, you might escape bankruptcy. But you don’t know what’s in store for your offspring 30 years hence. Setting a bad example can put their financial future at risk. My father may not have believed in pocket money, but although he had a regular nine-to-five job, I watched him work hard even after hours. He’d shoot photos—his hobby—and develop his prints in his darkroom. With Mum’s help, Dad also grew fresh flowers and plenty of different vegetables in our garden. He made me water his plants and weed the garden—jobs I’d help Mum with even when I was home for the vacations. I sometimes got comics and other books as a reward. Dad regularly won prizes for his pictures and his produce. The photos brought him extra money too—many people, and even the firm he worked for (in a job unrelated to photography), often gave him assignments when they needed photographs for reports. And the vegetables he grew saved us a lot.
I grew up seeing my parents work hard, earn more and save. So, like Dad, I’ve saved regularly too, and have never run into debt. My daughter has followed in our footsteps. Lakshmi, who’s been working, saves money while some of her young friends, she tells me, plan what to buy with their salaries long before payday.

2. Teach basic money management early.
You have to teach this at home, because that’s something children are never taught in school. But many parents tend not to discuss money with their children, one reason for so much financial illiteracy among adults.
Most experts feel it’s best to give an allowance, depending on the child’s age and how much you feel is right. Once, during the long Christmas holidays—it was 1962—Dad asked me what I did with my pocket money. A little embarrassed, I told him how
I spent all the 15 rupees in about 12 days, mostly on snacks and sweets, and was broke the rest of the month. I thought he’d therefore increase my allowance for next year. “No way,” he told me. “Why do you need all those snacks and sweets when you can go to the dining hall and get all the food you can eat?”
More questions and Dad quickly discovered that most of my friends got no more than Rs5 or 10 a month. The next year, I got a shock. My allowance had been reduced to Rs5. Dad simply explained that he wanted me to feel no different from my friends, adding in his letter, “We are not rich to waste so much money.” I cursed my luck for having asked for more, but tried to stretch my reduced allowance, spending that Rs5 much more carefully. Looking back, it was a big lesson in money management.
By the time I was in high school, Dad started to tell me about his small investments, and how he’d saved hard for them. I learnt how he invested in different assets like gold and property and bank fixed deposits for more safety. Today, I know that it’s called “asset allocation to spread the risk.” One day, in 1974, when I was a teenager, he helped me fill up an IPO form. I then rode my bicycle and took it along with a cheque to a bank in town. Dad later explained to me about the value of investing in equity shares, and how they worked. Over the years, I watched as those hotel shares we were allotted grew in value like no other investment did, earned dividends, and multiplied with bonuses. So, after I started working and had a disposable income, I thought of buying my own equity shares. Investing in them has not only been rewarding over the years, it also compels me to read up about finance and industry to stay ahead—all because of a father who took the time to teach me.

3. Let kids work part-time.
In a nation with so much unemployment and little dignity of labour, part-time jobs may seem hard to come by. But if your teenager is interested in a certain field, talk to professionals in that area who might take him on as an intern, at least part-time. While I was an undergraduate student, I worked part-time with no pay at a tiny news agency in my small town. But, with that experience, I started earning some money from freelance writing. I just typed out and posted articles to newspapers. They often got rejected, but when anything was accepted, I was thrilled. And when a small cheque came in the post, my confidence grew and, before I knew it I was working at a leading big-city publishing house.
Today, teenagers can find part-time jobs in advertising, in malls, supermarkets and fast-food restaurants. And any child can give tuitions to juniors, an exercise that will also help improve their own grades. If he’s interested in cars, why not send him to a mechanic’s garage? One boy I know did just that during his vacations. Today, he’s an automobile engineer.
Working at a McDonald’s, for instance, can teach youngsters a lot of values. “It was the first time I scrubbed the floor,” one teenaged girl told me. “But I had other tasks too, like working at the cash counter and cleaning tables.” Such part-time jobs will not only provide the joy of their very first earnings, they’ll also grow up to respect every kind of work—and one day grow into better professionals or managers.

4. Teach them to be generous.
If you are generous, your children will also learn to live that way. “My wife and I discovered many years ago that there are more satisfying uses for money than simply accumulating it,” said DeWitt Wallace, founder and first editor Reader’s Digest, who was among the most generous of people in his day.
 If you have much more money than you need, Gandhiji too believed, then what’s in excess is not yours; it must be shared. So teach your child to share. Make him learn as you donate, to charities or individuals who will be happier with your offerings, without your expecting anything in return. This way the money you make—and the money your child will one day make—becomes more useful (see “The Joys of Giving,” opposite page). You are then likely to earn more, because you find joy in making yourself able to give away even more.

5. Teach them about debt.
At boarding school I once lent a sizeable part of my allowance to a friend who refused to pay it back. I complained to a teacher, but he told me to “go learn to fight your own battles.” I asked the boy again for my money, but he bluffed and insisted he had returned it. I never got the money back, and we were no longer close friends. At barely 11 years of age, long before I’d read Hamlet, I had learnt to “neither a borrower nor a lender be, for loan oft loses both itself and friend.”
The best lessons we learn about money are often from our losses, and if that happens early, a child will grow up programmed not to let bigger losses occur in later life. As they say in the investment world, “Lose the money, but gain the lesson.”
Children must be taught to avoid debt, preferably by example. Today many youngsters are deep in credit-card debt, and you could partly blame their parents for letting it happen; for not being taught that borrowing money costs money, and that heavy debt can ruin you. Youngsters are highly influenced by the media and friends. Many advertisements are deliberately designed to create “pester power” and make parents spend on wants rather than on needs. Make your child understand that craving
for more and more things that their friends may have is neither wise nor gentle behaviour.