How to Teach Your Kids About Money

How to Teach Your Kids About Money

April 13, 2018

If you’re like most parents, you have a never-ending list of things you want to teach your child so they grow up to be a successful adult who contributes to society. From a young age, you model and instruct them in how to share, what respect looks like, how to handle responsibility, and how to prioritize. As a society, we are excelling in some areas of parenting, but falling behind in others. In a recent National Financial Capabilities Study, only 24% of Millennials (age 23-35) were able to answer the first three financial literacy questions correctly, and a mere 8% answered them all correctly. (1)

Just giving your kids a piggy bank is not enough. Do you have a plan for how you are going to teach your kids about budgeting, saving, or building credit? It’s easier to start when they are young than to play catch-up when they are teenagers. Here are some strategies to consider that will empower your children to make better financial decisions as they move through life.

Actions Speak Louder Than Words

If you’ve spent any amount of time with children, you know that more is caught than taught. If you want your kids to grasp the importance of handling money wisely, you need to let them watch you make financial decisions and model what you want them to learn.

A recent T Rowe Price study found that eight out of ten parents feel that they aren’t setting a good financial example for their kids. (2) If you spend money recklessly without a clear purpose, your kids will see that. If you rely on credit cards to cover expenses or argue with your spouse about finances, they’ll accept that behavior as the norm. Your actions set a precedent, so be intentional about how you model money management to your kids and let their watchful eyes be a motivator for you to change the negative financial habits you may have picked up.

Start the Conversation

Sometimes a silent model isn’t quite enough since many areas of personal finance aren’t visible. That is why it is critical to talk to your kids about finances. Unfortunately, talking about money is a long-standing cultural taboo. A 2013 study found that 63% of Americans would rather share their body weight with co-workers than their bank account balance. (3) Often this reluctance to discuss financial matters spills over into the home as well.

Forty-nine percent of the parents in the 2017 T Rowe Price study said they rarely or never discuss family finances with their children and 69% of parents experience at least some reluctance to having such a discussion. (4) Many parents even say they would rather discuss drugs or sex with their kids than money. (5)

But how are kids going to learn about money if you avoid talking to them about? Most parents don’t expect their kids to understand the dangers of drugs just because they have never seen their parents shoot up. Some things require more in-depth discussion and openness, and finances are one of them. And if you set the precedent of being open about finances when they are young, hopefully they will still come to you for advice or assistance when they get older.

Give Them Hands-On Practice

For financial understanding to truly sink in, you need to get your kids involved. Learning theory and research have consistently shown that the more active a learning experience is, the greater the learning gains and retention. (6) Most people have to do something to really learn it.

How does this work with kids? If you do a simple online search, you will find countless creative ideas for every age level, such as letting them divide their allowance into different categories, teaching them how to set short and long-term goals, and helping them understand what things are worth.

On a practical level, give your 5-year-old some money to buy something at the store so they learn the value of different items and realize that in order to obtain something (a toy), they have to exchange it with something else (money). Try letting your 10-year-old figure out the cost of the new video game he wants, plus tax, and help him save up his allowance for it. Let your teenager buy her back-to-school clothes on her own with a set amount of money. Don’t be afraid to let them make mistakes either. Sometimes learning the hard way is the best way to grow, and it’s better for them to learn those lessons when they are young when the consequences aren’t as severe.

Imparting financial wisdom to your kids is a challenging process that takes years. So, if you don’t feel like you’re doing an adequate job of teaching your kids about money, you’re not alone. Even if you are doing a good job, you probably agree with the 77% of the T Rowe Price survey parents who said that they wished there were more resources available to help them teach their kids about financial matters.

We Are Here To Help

Here at Haydel, Biel & Associates, we focus on values-based financial planning. One of the values that many of our clients prioritize is family. They want to impart their wisdom and experiences to their children and send them off into the world equipped and ready to achieve their goals. We believe that every child can learn critical financial lessons at a young age that will set them up for future success and we want to provide you with the tools to equip you as you start your kids off on their financial journey. To set up a meeting, contact me at (626) 529-8347 or email me directly at Together we can make sure that this next generation enters adulthood with the knowledge necessary to build a secure financial foundation for their bright futures.

About Haydel, Biel & Associates

Haydel, Biel & Associates is an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at