How To Teach Your Kids About Money

By Mike Guarino

If I were to ask you, “What do you want your kids to know before they leave your house as an adult?”, your answer would probably include things like a solid work ethic, empathy, responsibility, kindness, and respect. (1) And while no one will argue the importance and value of these traits, financial literacy should be at the top of the priority list as well. 

Your kids are going to learn about money from someone. Don’t you want that someone to be you? If you don’t know where to start, here are some tips!

1. Let Them Watch

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 8 out of 10 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.

2. Let Them Listen

Since many areas of personal finance aren’t visible, sometimes a silent model isn’t quite enough. That is why it is vital that you 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. 

But how are your kids going to learn about money if you avoid talking to them about it? This doesn’t have to be a long drawn-out conversation. Just let them in on your thinking and decisions as you go about life. So when you’re at the grocery store, explain why you buy the off-brand cereal instead of the name brand. When you’re at the bank, explain why the bank keeps your money and you only take what you need from the ATM. These real-world scenarios help cement the whys and hows of money in your child’s mind. 

And if you set the precedent of being open about finances now, while they are young, they are far more likely to keep coming to you for advice or assistance when they get older. 

3. Let Them Practice

For financial understanding to truly sink in, you need to let your kids experience their own successes and failures. On a practical level, give your five-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 ten-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. 

As your child earns money, have them split it between three jars: one for saving, one for spending, and one for sharing. When the savings jar fills up, take your child to the bank to open up an account. Let them take ownership over their money and give them opportunities to make mistakes while the stakes are still low. 

We Can Partner With You

At the end of the day, you want what’s best for your child. But whether it’s implementing an allowance, storing away money for college, or saving for other major milestones in your child’s life, it’s hard to know if you’re doing an adequate job. Most parents wish they had more resources at their disposal to help them teach their kids about finances. (4)

We’d love for you to think of Guarino Wealth Management as that resource. To talk more about how we can help you set your kids up for success and save for your family’s future, contact our office today at (973) 625-1112 or email mike3@guarinowealth.com to schedule a meeting.

About Mike

Michael J. Guarino III is lead financial advisor and CDFA™ at Guarino Wealth Management, an independent family-run financial services firm providing clients with financial strategies that suit their individual needs. Mike leverages his diverse background in technology to provide comprehensive and personalized financial planning services, including diversifying concentrated stock positions, retirement planning, benefits analysis, investment strategies, estate planning, and college planning. Mike has a bachelor’s degree from William Paterson University. To learn more about Mike, connect with him on LinkedIn.

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(1) http://time.com/3393652/pew-research-parenting-american-trends/

(2) https://corporate.troweprice.com/Money-Confident-Kids/images/emk/2015-PKM-Report-2015-FINAL.pdf

(3) http://www.countryfinancialsecurityblog.com/cfsi-april-2013/

(4) https://corporate.troweprice.com/Money-Confident-Kids/images/emk/2015-PKM-Report-2015-FINAL.pdf