Teaching Children Financial Literacy – Give Your Child a Head Start

As parents, we are entrusted with the responsibility of teaching our child or children in preparation for life. This is a daunting task. We feed them, guide them, and watch them as they take each step and go through every phase. For the most part, we, in general, do a good job. However, while we make sure they learn how to read, to write, to do math, to deal with relationships, and to navigate life in general, we often fall short in teaching financial literacy to them.

For some reason, financial literacy is taboo. Why? Perhaps there are many reasons including our own misgivings and lack of knowledge. Regardless of why, teaching financial literacy is important. Maybe it is even more important than ever before.

Nevertheless, giving our child or children the tools to be financially independent and successful is as important as all of the other things we teach them.

Sure we can invest money for our child or children to help them with college expenses and other expenditures in the future, but teaching financial literacy is different from investing money for them.

Financial literacy means teaching them how to make good financial decisions for themselves. It means teaching them all aspects of money along with an understanding and appreciation of it, so they can set themselves up for financial success in their futures.

While this is an ongoing conversation and lesson that will change as they grow and mature, teaching an understanding of money, an abstract idea, is key.

Like teaching children anything, it has to be an open, honest conversation as well as one that is also modeled. For example, teaching children to be frugal while being a spendthrift is hypocritical. Children see through hypocrisy.


  • having conversations along with your own modeling of these concepts about saving and spending money
  • helping them save money that they earn through ways your family establishes
  • even learning how to spend money judiciously will help set them up for financial success.

This should all begin at a young age. Too often children think that money almost does grow on trees. If they see parents constantly buying, especially simply using a plastic card without any thought or restraint or even any discussion using words such as budget and saving, they will get a false sense of money, and money will become an even more abstract idea. In addition, totally preventing children from ever spending any money at all, also sets them up with unrealistic and incorrect information and expectations.

Ways to teach children about money, again an ongoing and ever-changing conversation, need to be those in which money becomes real in order to make saving and investing money understandable and more tangible. This also helps foster the idea of saving and investing, so it becomes a habit established at an early age. It engrains in them the idea of being fiscally responsible. What a wonderful and invaluable lesson to teach them.

Ways of teaching children about money must include the child in the actual process.

Both my wife’s parents and my parents taught us how to deposit money into a savings account from money that we “earned.” This is an easy and exciting way to involve them in the process, encouraging them to save more and more money and empowering them in the process.

Equally important is the concept of earning money. Actually working and understanding the value of work and how it is tied to money is essential and further drives this idea of money being a tangible thing. There are many ways for children to earn money. But this is a topic for another blog. Nonetheless, when children acquire their own money and are empowered with saving it, investing it, and spending it, they are able to learn important life lessons about money and being fiscally responsible.

Along with these lessons, it is also important to teach the pitfalls of credit. Obviously this has to come at an age when they are able to understand percentages. Ideas about credit cards and credit in general are invaluable.

My wife had a credit card when she was in high school, but her parents were also on the card. It was used to teach financial literacy, to establish credit, and to give her financial independence. She already understood the importance of working for her own money and making wise decisions about saving, investing, and spending money.

Her parents often reminded her that when she wanted to buy something, she needed to compute the amount of time she had to work to make that purchase. This helped her tie the intangible to the tangible in an understandable way.

It also taught her not to make rash decisions or to spend money on a whim. So when it came to buying something on credit, she knew that it had to be something she really wanted to spend money on, that it needed to be a worthwhile investment or purchase, and that it needed to be something she could pay off without having to pay interest.

It was ingrained in her that she had to take the money to the bank almost immediately to pay for the purchased item. To this day, she carries this with her, making sure purchases are meaningful, prudent, and can be paid for in full.

We don’t carry credit card balances, and we want to instill this idea in Logan. When it is appropriate, we will add Logan as an authorized user to our credit card which will allow her to establish credit at an early age.

Since she will be on our credit card, we will ensure that her credit is good, so she is able to have a credit rating as close to 850 as possible. Credit card companies typically don’t give credit scores until an individual is eighteen, but some will start reporting at 14 to 16 years of age. You will want to check with different credit card companies to see what their individual rules are for credit cards and secured accounts for building credit.

In addition to credit, another important lesson to teach as soon as children are able to understand the concept is about compound interest and investments. This should be normal conversation in a family.

Showing children the way money can grow and the different types of investments that are available to them is important and empowering. Why wait?

Teach them and guide them along this path to take full advantage of the wonder of compound interest.

We are investing now for Logan, and we will have conversations with her when she is able to understand the concept of the growth due to compounding, so she is able to continue to invest, grow her money, and set herself up for financial success. We have set up several types of accounts for Logan which I will in an upcoming blog about investments for your children

Like I said earlier, talking about money – all aspects of it – should be natural rather than something that we shy away from.

Empower your children and help them grow financially just as they grow personally and intellectually. It is our responsibility to give them all of the tools to be successful adults. Giving them a head start is part of parenting. Don’t wait.

Published by Budgetdog

👨‍💼| CPA that quit 9-5 for @budgetdog 💵| Millionaire goal: 30 years old 💰| Paid off $76k of debt in 1 year 🏠| Paid off home BEFORE 30

Leave a Reply

%d bloggers like this: