– Mahek Tomer, IP Owner, India’s Future Investors (IFI)

Ask a Class 10 student to calculate compound interest, and there is a good chance they will know the formula.

Now give the same student ₹5,000. Tell them there are three things they want to buy, one thing they actually need, and an unexpected expense has just come up.

What will they do?

For me, that second question tells us much more about financial preparedness than the first one.

This is where I feel there is a gap in the way we think about financial literacy. We teach children how to calculate amounts, but not necessarily how to make decisions when money is involved.

And real life is full of those decisions.

Money is not just about numbers

Most financial decisions don’t happen under ideal conditions.

There is a limited amount of money. There are competing priorities. There is often limited time. Sometimes there is pressure. And almost always, there is emotion.

Do I buy something today or wait?

If I can afford the EMI, does that mean I can actually afford the purchase?

If I suddenly receive ₹10,000, what should I do with it?

And what happens to my carefully planned monthly budget when an expense I wasn’t expecting suddenly appears?

These are ordinary questions. But that is exactly the point.

Financial literacy at school shouldn’t begin with complicated financial products. It should begin with everyday choices.

Sometimes ₹100 is enough to teach a lesson

You don’t need to explain asset allocation to an eight-year-old.

Give them ₹100.

Let them decide whether they want to spend all of it today, save some for something they want next week, or keep it for later.

Then ask a very simple question: Why?

That conversation can teach more than a definition on a page.

As children get older, the situations can become more realistic. Give a teenager a hypothetical monthly budget covering travel, food, entertainment and savings. Halfway through the month, introduce an unexpected expense.

Don’t immediately tell them what the correct answer is. Let them work it out.

Will they cut another expense? Use their savings? Borrow? Change the original plan?

The important part is not whether every child arrives at the same answer. It is whether they begin to understand that every financial choice comes with a consequence.

That is why I would be hesitant to turn financial literacy into another subject in which students memorise ten definitions, sit an exam and then forget them.

Money has to be experienced through decisions.

Knowing what to do is different from doing it under pressure

This, to me, is one of the most interesting aspects of financial behaviour.

Most of us know we should save. Most of us know unnecessary debt isn’t a great idea. Most of us know an impulse purchase can probably wait.

And yet we don’t always behave that way.

Why?

Because decisions change when pressure enters the picture.

The sale ends tonight. Your friends already have the latest phone. An app is offering instant credit. Something you want is suddenly available through easy monthly payments.

Today’s children are going to face these situations much earlier than previous generations did.

They are growing up in a world where spending ₹5,000 may not even feel like spending ₹5,000. There may be no cash leaving their hands. It can happen with a tap on a screen.

Convenience can make life easier, but it also makes the pause before a decision more important.

Teaching a young person how to make a digital payment is digital literacy.

Teaching them to ask themselves whether they should make that payment is financial literacy.

The first classroom is usually home

Whether we realise it or not, children are already learning about money from us.

They notice when their parents compare prices. They hear conversations about bills and EMIs. They see when a family postpones one purchase because something else is more important.

They also notice our bad habits.

We don’t need to discuss every detail of household finances with children. But we can involve them in small decisions.

Take them grocery shopping with a budget. Let them save towards something they want. Give them choices. And sometimes, allow them to make the wrong choice with a small amount of money.

A poor ₹200 decision at 12 can become a useful lesson. The same behaviour with ₹2 lakh at 25 can become a serious problem.

Schools and parents therefore have different but equally important roles. Schools can ensure that every child gets a basic understanding of money, irrespective of their background. Parents can help turn that understanding into habit.

Beyond marks

We understandably spend a lot of time preparing children for examinations, college admissions and careers.

But what happens after they get a job?

A first salary brings freedom, but it also brings decisions. Questions about spending, saving, borrowing, insurance, taxes, credit and financial responsibilities can arise very quickly.

And earning more doesn’t automatically mean managing money better.

Someone earning ₹50,000 and making thoughtful decisions may feel far more financially secure than someone earning twice as much but constantly spending beyond their means.

That is why financial literacy cannot be only about increasing financial knowledge.

It has to build judgement.

Can I separate a want from a need? Can I recognise risk? Can I delay gratification? Can I change my plan when circumstances change? Can I remain sensible when there is pressure to decide quickly?

These are not questions of profession, income or academic qualifications.

Financial intelligence reveals itself most clearly through decisions, not designations.

A person doesn’t need a finance degree to make a sensible money decision. And having a finance degree doesn’t guarantee that every decision will be sensible either.

Perhaps that is what we should ultimately teach our children.

For years, we ask children, “What do you want to become when you grow up?”

I think we also need to prepare them for a simpler question: “When the choices become yours, how will you decide?”

Because education shouldn’t only prepare a child to earn their first salary. It should prepare them to make better decisions when that salary finally arrives.

Also Read: Beyond the smart classroom: What will define the next generation of digital learning in India?