Raising Money Savvy Children

Talking about money is not something all parents are comfortable with. For some people it can be too complicated. For others, too scary. Some families simply just do not have the time to teach their children about money. According to a recent T. Rowe Price survey, 69 percent of parents have some level of reluctance when it comes to talking to their children about money. However, those parents that are able to get over the hurdle and have these conversations with their children are much more likely to have children that are financially smart. As a parent, you can be part of this solution. Budgeting, earning, saving, spending, and investing are broad concepts that you can teach your children at a young age to help ensure they are money savvy throughout their lives.


Creating a budget is a great exercise for kids. Have your child divide a sheet of paper into two columns, “money in” and “money out.” Have your child itemize the various ways in which they receive money (jobs, allowance, gifts) and their expenses, including saving and investing. This exercise will give your child a snapshot into the ways they interact with money and teach them that they are personally responsible for managing their money.


Creating or helping your children find opportunities to earn money is a great way to teach them the value of hard work and what it takes to earn money. You can have your children perform tasks around the house for an allowance. They can start small neighborhood businesses – mowing lawns, raking leaves, babysitting, etc. – to earn money as well. Encourage your children to earn all or part of the money needed for some of their impulse purchases reinforce the value of hard work. Having your children earn money to support some of their purchasing will help eliminate any sense of entitlement.


Teaching your child to save can be one of the most important aspects of learning about money. By saving a portion of the money they earned or were given today, you can encourage them to embrace the delayed-gratification mindset. One way to encourage saving is to open a savings account with your child and match some portion of every dollar they save. Your child will begin to realize how many weeks of saving their allowance or paychecks it will take to make a purchase. Saving will teach your children the importance of discipline and goal setting.


Spending is often the most fun part of learning about money. You need to teach your children the difference between spending on needs versus wants. You want to help your children become smart spenders so they can learn how their spending choices affect their money management. Naturally you will want to supervise all of their spending habits. However, allowing them to make purchases they later regret and feeling buyer’s remorse can serve as a valuable teaching moment for the future.


As your children age, they will begin to gain an interest in investing. One of the most effective and efficient ways to teach your children about investing is by purchasing a share of stock in a company they are interested in. They can follow the stock and as they learn more, you can start to explain all the factors that affect a stock’s price. You should illustrate to your children the power of compound interest and how investing today can be a valuable tool for their future.

According to the most recent S&P Global FinLit Survey, only 57% of American adults are financially literate. This is, in part, because as children, a lot of these adults did not have parents teaching them to be money savvy. As a parent, you can do your part by raising money savvy children from a young age and combat the issues of financial illiteracy.