How to teach children about money
The simplest way to teach children about money is to let them handle some of it. That means a little pocket money, a goal they want to save for, and a parent who talks through the choices out loud. Start small, so that early mistakes cost a few rupees. As they grow, add a bank account, then digital payments.
This article is about the child learning. If you want to put money away for your child instead, see Ways to invest for your child's future in India.
How do you teach children about money?
Give them small amounts to manage, let them choose, and talk about the choice afterwards. A child who spends the week's pocket money in one day and has nothing left for the weekend has something real to talk about.
Three habits a parent can show rather than lecture about:
- Say your plan aloud at the shop: "We came for rice and dal, so the biscuits wait."
- Show a bill and point to what each line paid for.
- Wait a day before a big purchase, and let the child see you do it.
What should children learn about money at each age?
Begin with coins and counting, then move to saving for a goal. After that come a budget (a plan for what you will spend and what you will keep aside each month) and a bank account, and by 18, running their own money. The ages below are an editorial guide to ideas, not a schedule.
| Age | What they can learn | Things to try |
|---|---|---|
| Under 7 | Money buys things; coins and notes have different values; some things need waiting | Let them hand over the coins at the shop; a jar for savings |
| 7 to 12 | Pocket money, saving for a goal, needs and wants, how interest works | A weekly amount on a fixed day; a goal chart; a look at a bank passbook |
| 13 to 17 | A monthly budget, a bank account in their name, rules for paying by phone, earning | A budget sheet; a savings account; a first small paid task outside the family |
| 18 | Their own identity and address checks (KYC), their own accounts, taking over investments held in their name | Going to the bank together to complete the paperwork |
Should you give children pocket money?
Pocket money can work as a practice budget: a fixed amount, paid on a fixed day, which the child decides how to use. The right amount depends on your household and what you ask the child to pay for, so no number fits everyone.
One way to show the idea is the 50-30-20 rule, a rule of thumb that puts about half of the money to needs, 30% to wants and 20% to saving. Take an assumed ₹200 a week for an 11-year-old called Aarav:
- ₹100 for things he must pay for from it, such as canteen snacks or the bus
- ₹60 to spend freely
- ₹40 to save
Families differ on whether to tie pocket money to chores. That is a household decision.
How can children save money?
Give the saving a goal the child chose, and a place where they can see it grow, such as a jar or a passbook.
Say Aarav wants a ₹600 cricket bat (an assumed price). Saving ₹40 a week, he gets there in 15 weeks, because 600 divided by 40 is 15.
Now suppose he gets ₹500 as birthday cash (assumed) and puts it toward the bat. Only ₹100 is left to save. That is 2.5 weeks of saving, so three weeks.
A parent can also set a household rule: for every ₹40 the child saves, the parent adds ₹10 (assumed). Aarav's ₹40 becomes ₹50 a week, and the ₹600 bat takes 12 weeks instead of 15.
For teenagers already in college, How to save money as a student in India goes further.
Can a child have a bank account in India?
Yes. Under RBI's 2025 directions to banks, minors (children under 18) of any age may be allowed to open and run savings accounts and term deposits (the bank's name for a fixed deposit). They do it through a parent or guardian, meaning the adult who runs the account for the child. A mother can open one as her child's guardian.
A bank may also let a child run an account alone. RBI sets the floor at not less than 10 years, and the bank fixes the actual age, the amount and the terms. A minor's account can never be overdrawn.
At the post office, a guardian can open a savings account or recurring deposit (where you pay in a fixed amount every month for a set period) for a minor. A minor who has attained the age of ten can open one as well. A recurring deposit is a handy way to teach monthly saving.
How do you explain interest to a child?
Interest, on a deposit, is what the bank pays you for keeping your money with it. Make it visible with numbers. SBI pays 2.5% a year on savings balances (since 15 June 2025), credited every quarter. Its 1-year fixed deposit (money placed with the bank for a set period at a rate fixed when you open it) pays 6.25% on the card in force since 15 December 2025. These were SBI's rates on 2 October 2026, used only for illustration; rates change.
Take an assumed ₹5,000:
- Left in an SBI savings account for a year at 2.5%, it earns about ₹125. It is "about" because quarterly credits earn a little themselves.
- Placed in the 1-year FD at 6.25% with the interest paid out, it earns ₹312.50.
For the rules on fixed deposits in a child's name, see Fixed deposit for children and post office savings schemes.
How do you teach children about UPI, cards and online payments?
The rules matter more than the tools. Never share an OTP (the one-time password sent to your phone to approve a payment), a PIN or a UPI PIN (the PIN that approves a payment from your account; UPI is the phone-based system for instant payments from a bank account) with anyone, family included. And ask a parent before paying for anything inside a game or an app.
- RBI's directions leave extra facilities such as ATM or debit cards, internet banking and a cheque book on a minor's account to each bank's own policy. Banks decide whether a child's account gets them.
- According to a BHIM release by an NPCI subsidiary, UPI Circle lets a parent authorise another person to pay directly from the parent's account. The monthly limit goes up to ₹15,000, and the permission can run for up to 5 years. The release names parents letting children manage daily or educational expenses.
For more on staying safe, read How to protect yourself from online and banking fraud.
Should teenagers earn their own money?
Earning teaches what money costs in time. In India, money a minor earns from their own work or from a skill or talent is not added to a parent's income for tax, under section 99 (the old section 64(1A)). Tutoring younger children is one example.
Interest on savings in the child's name is treated differently. While a child is under 18, it is added to the income of the parent who earns more, or the parent who looks after the child if the parents are not married to each other. The first ₹1,500 a year per child is exempt, and the income of a child with a disability as defined in the tax law is not added. Say Riya, 12, earns ₹4,200 of interest in a tax year (assumed; her parents are married and she has no such disability). ₹1,500 is exempt and ₹2,700 is added to the income of the parent who earns more. Fixed deposit for children has the detail.
Which money games and activities work for children?
Games that use real prices and real choices give children real practice. A parent or teacher can run any of these:
- A pretend shop with price tags, where one child is the shopkeeper and gives change
- A kirana shopping list with a fixed amount to stay within
- Comparing two packs by price per 100 grams
- A teenager's monthly budget sheet with three columns: money in, money out, money kept aside
- A savings goal chart, with a line drawn each week toward the target
- Planning a family outing within a set amount
What changes when your child turns 18?
At 18, the accounts and investments held in their name become theirs to run, once they complete their own KYC, the identity and address checks that banks and fund houses must do.
For a bank account, RBI's directions say the bank takes fresh operating instructions and a specimen signature once the holder is an adult. If a guardian ran the account, the bank gets the balance confirmed. New photographs are taken, and the bank may ask for KYC again. At the post office, the account is converted with a fresh account opening form and KYC.
A mutual fund folio is your account number with a fund house. From the day your child turns 18, you can no longer operate it. SIPs (investing a fixed amount at regular intervals, usually monthly) stop, and no new investment is accepted, until the child completes their own KYC and registers a bank account in their name. After that, the folio is theirs. Pros and cons of investing in mutual funds in a minor's name goes through it.
A guardian can open a Sukanya Samriddhi account for a girl who has not attained the age of 10, and runs it for her until she turns 18; see Sukanya Samriddhi Yojana. NPS Vatsalya is an account a parent or legal guardian opens in a child's name, under the National Pension System, a government-run retirement savings scheme; see the new NPS rules.
FAQs
How do I start teaching my child about money?
You teach children about money by letting them handle small amounts of it. That means pocket money with a few fixed rules, a goal to save for, and talk about their choices. Begin with coins and a jar, then move to a savings goal and a simple budget. Let early mistakes happen while the amounts are small.
How much pocket money should a child get?
There is no right amount; it depends on your household and on what the child must pay for from it. Decide what the money has to cover, pay a fixed amount on a fixed day, and let the child decide how to use it. An assumed ₹200 a week split 50-30-20 gives ₹100, ₹60 and ₹40, as an illustration only.
How old must a child be to open a bank account in India?
Under RBI's 2025 directions to banks, a minor of any age may be allowed to open a savings or term deposit account through a guardian. A bank may let a child run one alone from an age it fixes, which cannot be below 10, on its own amount and terms. At the post office, a minor who has attained the age of ten can open a savings account or recurring deposit.
Can a child use UPI?
Through UPI Circle, a parent can let a child pay from the parent's own account, up to ₹15,000 a month. That is according to a BHIM release by an NPCI subsidiary. Whether a child's own account comes with a debit card or net banking is each bank's policy. Never share an OTP or a UPI PIN with anyone.
Is a teenager's income added to a parent's income for tax?
Not if it comes from the child's own work or from a skill or talent, under section 99 (the old section 64(1A)). While the child is under 18, interest and gains on savings in the child's name are added to a parent's income. That is the parent who earns more, or the parent who looks after the child if the parents are not married to each other. The first ₹1,500 a year per child is exempt. The income of a child with a disability as defined in the tax law is not added.
Should children learn the 50-30-20 rule?
It can work as a simple way to split pocket money. On an assumed ₹200 a week, about half is ₹100 for needs, 30% is ₹60 for wants and 20% is ₹40 for saving. Other splits are also quoted, and none of them is a regulation.