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How to Teach Your Kids About Money

As parents, there are so many things we have to teach our children, beginning with the basics of how to eat and share toys to more complicated lessons such as making decisions and getting along with others. 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 (ages 23-35) were able to answer the first three financial literacy questions correctly and a mere 8% answered them all correctly.

Most parents agree that we need to do a better job teaching our kids about money. In 2015, T. Rowe Price reported that 80% of parents didn’t think schools were doing enough to teach kids about financial matters. However, parents cannot abdicate all responsibility to the schools. Raising children and teaching them to navigate the world is first and foremost a parent’s responsibility. 

Set a Good Financial Example

The first step in teaching your kids about finances is modeling what you want them to learn. Few parents would disagree with this concept. The same T. Rowe Price study mentioned above found that 69% of parents are very/extremely concerned about setting a good financial example for their kids. The vast majority—eight out of ten—feel that they are setting a good financial example, but two-thirds also admit to doing things that wouldn’t qualify as setting a good example.

An enormous 40% admitted that when it comes to talking to their kids about finances, it’s "do as I say, not as I do." Anyone who has raised kids knows that isn’t enough. My clients tell me they are very concerned about setting a good example for their children. The first step in teaching your kids about money is simple: Show them.  

Talk About Finances

Sometimes a silent model isn’t quite enough, and some areas of personal finance aren’t very visible. That is why it is imperative to talk to your kids about finances. But talking about money may be a long-standing cultural taboo. Often this reluctance to discuss financial matters spills over into the home as well.

In the T. Rowe Price study 49% of parents said they rarely or never discuss family finances with their children, 18% admitted to being very/extremely reluctant to discuss financial matters with their kids and 72% of parents experience at least some reluctance to having such a discussion. But how are kids going to learn about money if you avoid talking to them about it? Some topics require more in-depth discussion and openness and finances are one of them. 

(For more from this author, see: 3 Ways People Inadvertently Disinherit Loved Ones.)

Get Your Kids Involved

If you want financial understanding to actually 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. Most people have to do something to truly learn it.

How does this work with kids? Start by teaching them the difference between a penny, nickel, dime and quarter. Beyond just teaching the values of the coins, show them how to earn money by completing basic, age-appropriate chores such as making the bed and folding the clothes. As the coins start adding up, give them the option to buy a toy or to save her money and earn interest. Just as any adult, they will love the idea of making money for no extra work!

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. While the road ahead in taking care of yourself and your children may seem challenging, it’s important to take one step at a time and do your best to create good habits for them early on.

(For more from this author, see: Should My Spouse Work or Stay Home?)


The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. NPC does not render legal advice.