It has always fascinated me how children learn about money. Whether it is switching off the fan or light or allocating money to what they want – the process is worth seeing.

Last 2 years my daughter has been getting a lump-sum budget for Diwali. She has to choose between spending on a dress or crackers – I am happy going 100:0 either way. She makes her choice. Then we go to the shop. She decides to allocate for each cracker. Last year she felt she could have bought more crackers – but it was too late – the dress was already bought. But she did not want to exceed the budget or borrow (she did not want the interest on her bank account to go down!!).

Even when I said ‘I do not have money to buy the Rs. 6k teddy bear’ or the Rs. 1k Doll house for Barbie’ – it had to be explained “We choose not to allocate money for the teddy / barbie, but we have Rs. 22 to buy a loaf of bread :). All this I had done in an article …here it is

http://www.lovingyourchild.com/2010/05/parenting-advice-teaching-kids-manage-money/