Peer pressure is probably the worst enemy of the parental purse. My friend Ravi and his wife Maya were having trouble with their 12-year-old son, Rohan . The boy seemed incapable of delaying gratification: he had to have everything now. He lacked confidence, and because of peer pressure, he wanted everything his friends got—not just toys, but also more expensive stuff, like clothes, mobile phones, and other things. Rohan apparently thought his parents were very rich, with an unlimited reservoir of money.

At a loss to deal with this, Ravi and Maya sought my help, and we ended up having a lengthy discussion on financial literacy for kids. Rohan is hardly a "problem child" where financial literacy is concerned; it's an issue with a lot of children who are exposed to affluence at a tender age. Perhaps the main reason for this is the lack of clear communication about money. Often, all a child has to do to get his parents to part with money is to ask for it. Parents should talk to their kids about money as comfortably as they talk about cricket or a trip to the mall. Children need to understand what their parents do for a living, and not harbour the illusion that money grows on trees.

Indeed, it's very important for all parents to discuss and share their values with regard to money, what it means to them, and what they hope to accomplish with it. As a parent, you can spur your child to think by asking her what she thinks of money, and to explain its uses.

The hardest thing for you, as a parent , to learn—and perhaps the best thing you'll teach your child—is to say "no". Teach your child that it's sometimes better not to have something you want, or to wait before you can get it. Say, Yes, we can afford to buy this, but this is not the best use of our money" , or "I do not want to spend our money for this." Appeal to her reason by explaing your decision.

Part of the reason children have confused ideas is that they often get mixed messages about the easy availability of money. There are four main drivers for this. First, that conjuring trick you do at the ATM. It really does seem the money appears magically and freely from an ATM or credit card. When your child is old enough to use the ATM, open a junior account for him. Let him spend money from there, and ensure he reads the receipts—it will make the ATM seem a little less magical.

The second reason kids get mixed messages is time—or rather, the lack of it. Most urban families today haven't much to spare, and unfortunately, money becomes a substitute. The third driver is friends and peers. Your child's friends can be a much more powerful influence than your family. And the fourth is advertising and the media. Despite your best efforts to instill good financial values in your children, corporates with enormous advertising budgets and pervasive campaigns will manage to tempt your child. The sooner a child understands how his parents think about money, the less mixed all those messages will seem.

Of course, it's not just kids who are confused about money grown-ups are, too! Financial literacy is Greek and Latin to many of in this era of economic prosperity. Often, earning money is not the issue—managing it is the problem, or—for an unfortunate fewa nightmare. Fundamental things get overlooked, such as figuring out how much life insurance one needs, prompting campaigns like "KILB" (kam insurance lene ki bimari). Many people find themselves in ensnared in debt at a young age, or in some other hot water because of bad money strategies . I have come across several people who can't save, despite earning more than Rs 50 lakh a year!