How to Teach Your Kids Financial Responsibility'/
little boy saving money

Teaching your children financial responsibility is one of the best inheritances you can provide them with. Many people make financial mistakes early on that are difficult to recover from. Preparing your children for financial independence won’t prevent them from ever making mistakes. It will, however, give them the foundation to at least be aware of the potential repercussions and prepare them to deal with the consequences of the mistakes they make.

Board Games

Especially for younger children, board games can teach the fundamentals of budgeting and investing in a practical manner. Think of games like Monopoly and Life. Here, kids get to learn how to spend a finite amount of money and make it grow. Sure, your kids aren’t going to be ready to invest in the real estate market after a few rounds of family game night, but they will gain basic understanding of money, which is one of the first steps to financial literacy for children.

News and Awareness

Even children as young as middle school can pay attention to current events. Making the nightly news a family event is one way to do this. Another is to gently suggest that your child read the financial and business sections of the newspaper. The point here is not necessarily to make them wild for the Forbes and SmartMoney. Rather, you want to get your kids thinking critically about the financial news of the day. Make sure to actually discuss the events with your kids.


Allowances are great for a number of reasons, especially if you make your children work for it. An allowance can teach kids the value of hard work and a dollar. You can also use it as a point of entry to talk about prices and savings. For example, you can frame a discussion of how much their favorite cookie recipe costs in terms of a portion of their allowance. Another idea is to talk about something they want that’s relatively expensive (say $50 or $100) in terms of how many weeks it would take them to save if they spent half their allowance. This gets children thinking about long-term savings, a key foundation of financial literacy.

Credit Card Talk

People talk to their kids about drugs and sex. Why don’t they have similar conversations about credit cards? Credit cards aren’t necessarily good or bad — they’re a financial tool that can go either way. Before your children head off to college, you should sit down with them and have a serious discussion regarding interest, payment terms and credit. You can introduce these conversations earlier, but before they leave the nest you should have a “birds and bees”-type conversation about credit and responsible credit card use.

Matching Funds

When your child comes to you and wants something relatively expensive (say, around $100), offer to go halfsies with them. Help them brainstorm ways to earn half of the money. This will teach them a bit about entrepreneurialism and creative, critical thinking about good ways to make money. Another way to do this is with the “Mom and Dad 401(k) Plan.” You match funds that your child saves to show them the value of saving and how their money can grow if they practice restraint over running out and spending it willy nilly. This helps to prepare children for adulthood in a manner similar to a matching 401(k) plan. You can even tell them there will be a penalty for early withdrawals and teach them about interest and compound interest.

Three Jars

Three jars teaches children the three pillars of money: money for now, money for later and money for charity. You can advise your child on how to divvy things up a certain way or allow them to make their own decisions. Either way, they’re going to learn a lot about financial planning and dealing with the finances they have.

Prepaid Credit

This one is mostly for teenagers and older children. While prepaid debit cards are a controversial subject, you can’t go wrong with a secured card –a credit card that you essentially “prepay to secure” with a deposit. A secured credit card can be a great way to introduce a child to more advanced ideas of financial responsibility, like the proper use of credit, the right way to use a credit card, and how to establish and build a solid credit report to earn good credit scores.

Preparing Your Children for Their Future

Giving your kids some training in financial literacy is an important part of helping them mature and grow. One day they won’t have you to take care of their expenses for them. To help them prepare for that day, start financial literacy training early. Your kids will thank you when they’re older.

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Published July 10, 2015
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