Pocket Money to Portfolio: Teaching The Next Generation To Save And Invest Early
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One area that still deserves far more attention in India’s education system is financial literacy. It should not be reserved for commerce students or introduced only when a person starts earning. Saving, inflation, budgeting, compounding, insurance and basic financial planning are life skills, and they can be introduced much earlier. The National Centre for Financial Education’s nationwide survey found that only about 27% of adults met its minimum financial-literacy threshold, highlighting the gap that early financial education can help address.
Pocket money as the first lesson
Interestingly, one of the simplest financial-education tools is already familiar to many Indian families: pocket money. Giving a child a fixed daily, weekly or monthly allowance creates a small but meaningful financial decision. Should it all be spent immediately? Should some be kept aside? Should the child save for something more expensive later? Repeating these decisions teaches budgeting and delayed gratification long before the amounts become significant.
The next step is to turn that habit into a simple framework. A student can divide pocket money between regular spending, a small buffer for unexpected needs and a specific savings goal, perhaps a pair of shoes, a gadget or eventually a larger education expense. The objective is not to make children investors overnight. It is to teach them that money can be given a purpose.
Why starting early matters
This is also where the biggest lesson of starting early comes in: compounding rewards time. Consider a purely illustrative example. If someone invested ₹1,000 every month from age 18 and earned an average 10% annual return, they would have contributed ₹2.64 lakh by age 40, while the investment could grow to around ₹7.6 lakh. Starting the same monthly investment at 28 and continuing until 40 would mean contributing ₹1.44 lakh and accumulating roughly ₹2.8 lakh. The returns are not guaranteed, but the difference demonstrates the value of giving money more time to compound. Ten years of delay can make a meaningful difference.
From internships to the first job
That discipline becomes even more valuable when a student moves into internships, professional courses or their first job. As income starts, financial priorities become larger: education, a phone, travel, family responsibilities and eventually long-term wealth creation. This is also the stage to understand emergency savings and adequate insurance before taking on unnecessary investment risk.
Most importantly, young people need to understand that the right investment depends on when the money will be needed. Money required soon should generally not be exposed to the same level of market risk as money meant for a goal many years away. Short-term, medium-term and long-term goals therefore require different approaches. Starting with simple, diversified products can allow young investors to learn before moving into more complex investments or direct equity.
Building habits, not just investors
India does not need every teenager to become an investor. It needs young people to understand where their money goes, why saving matters, how inflation affects purchasing power, what risk means and, most importantly, why starting early matters. If those habits are built with the first ₹100 of pocket money, moving from pocket money to a portfolio later in life becomes less of a sudden financial decision and more of a natural continuation of something they have been practising for years.
Views expressed are personal
The author is Managing Director at Indira Securities
