1) Inculcate the habit of saving
Young children understandably have trouble grasping the concept of savings. The best way to get them started is to have a piggy bank. All cash gifts given on festivals, occasions or birthdays can be accumulated here. The money can be counted periodically - every quarter seems doable.
Parents can add to it by rewarding their children monetarily for doing certain chores.
Alternatively, they can just add an equal amount to what has already been accumulated. For instance, if a child has saved Rs 500 in a quarter, the parent could add an equal amount – another Rs 500.
This money can then be utilized to buying a toy or something the child wants. It teaches the child goal setting (saving money specifically to buy something) and patience.