How to Raise Financially Responsible Children

To instill financial responsibility in your children, you first need to have a clear understanding of your own emotional and behavioral relationship with money. Take note of the areas of finance where you feel confident and the areas where you want to improve. Reflect on the lessons your parents and other role models explicitly and implicitly taught you about money when you were growing up. How did your childhood and young adulthood shape your beliefs and values about the best uses of money and what it means to be successful? Which lessons or experiences were helpful, and what mistakes do you want to avoid?

Answering these questions will give you a sense of self-awareness that can form the foundation for imparting valuable lessons to the next generation, allowing you to be more thoughtful and intentional about the lessons you share with your children. When you understand yourself in relation to money, you can tailor your approach to teaching your children based on your strengths and weaknesses. For example, if you feel confident about your budgeting and saving skills, you might involve your children in the process. While you show them how to budget, you can explain the importance of allocating funds for various needs and wants and demonstrate how to balance funding for your short-, medium-, and long-term goals. Use real-world examples to explain the consequences of overspending or neglecting savings. Alternatively, if you have identified investing and knowledge of the stock market as an area for growth, consider learning how to invest and about effective investing strategies together as a family. Explore age-appropriate financial literacy resources and talk with your children about what you are both learning. You can instill your financial values in your children as well. For example, if you and your spouse value generosity, you can involve your children in decisions about which charities or foundations you will donate to and share your reasons for wanting to give.

Communicate Openly About Money

Transparently telling your children about your own relationship with money, your family’s financial situation, and the actions you are taking to set your family up for lasting financial success creates an open dialogue about money, breaking down the stigma often associated with financial discussions. As you share your financial knowledge and beliefs, encourage your children to ask questions about the family’s finances and about money in general. When your children do ask questions, answer them as honestly as you can, breaking down complex concepts with simple examples to help younger children understand. As your children learn and grow, you can involve them in practical discussions about the family’s discretionary spending and savings goals. Ask for their input on the topics, and then explain your decision-making process and the reasons why you agree or disagree with their ideas. Then follow up with the child about the outcomes of the decisions you made, particularly any decisions they contributed to.

Allow Your Children to Practice Good Financial Behaviors

Teaching children about money extends beyond theoretical knowledge. Incorporate practical exercises to allow them to practice the various aspects of managing finances: earning, saving, spending, and giving. Children of all ages can begin learning to earn money in a myriad of age-appropriate ways. Help your child find a method of earning money that they find engaging or that leverages their talents and interests. For example, they could start or help with a small business (e.g., lemonade stand, car wash, pet sitting), sell toys and clothes they no longer use, or complete additional chores to earn an allowance. Teenagers can practice earning by working for the family business or getting a part-time job. Once they have earned their own money, guide your children in deciding how to allocate their money, ensuring they understand the benefits of each allocation. They can spend the money on short-term goals and immediate wants, such as snacks or toys; save some to use later for more expensive or long-term goals, like a new video game or bicycle; invest to grow their money for the future; or donate to a local charity or a cause they support. 

Most people prefer one or two areas of money and may be tempted to neglect the others, and this will likely be true for your children as well. For example, some people are most excited by the prospect of earning and investing because they love seeing their net worth increase over time. Conversely, some people are most enthusiastic about the immediate gratification spending and giving can provide, and they might need help seeing the benefits of long-term strategies. Giving your children opportunities to practice a wide variety of positive financial behaviors will help you identify their financial strengths and weaknesses and guide them toward becoming financially well-rounded and responsible adults.