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Teaching Children About Money Is Critically Important

Society is Failing in Teaching Children about Money

The stunning news that seven in 10 adults could not come up with $1,000 to cover an emergency expense reveals the extent of the financial literacy deficit in the United States. Half of Baby Boomers have little of no confidence in their capacity to fund their retirement. The financial illiteracy among adults of all ages has reached pandemic levels; yet, we continue to launch young adults into society with little or no practical knowledge of managing personal finances.  Teaching Children about money is often overlooked.

By the time your teen graduates from high school, they will be faced with many financial choices, especially when they enter college. By the time they leave college, they could be $30,000 in debt with even more critical choices that can make or break their financial lives. Without some preparation, your teen is bound to learn about money through the school of hard knocks, which can be an expensive education. Here’s how to prepare your children for successful money management.

Open a Checking Account

The best way to quickly engage your kids in the money management process is by opening a checking account. If your child is under the age of 18, the account is actually a subaccount that enables you to transfer funds easily or automatically. The account comes with a debit card which is considered to be a safer way to protect their money and control expenses. The account can be monitored using the bank’s online banking platform.

Create a Budget

Agree on a weekly amount to be deposited to the account from your child’s earnings from his job or allowance. Then come up with a weekly spending budget, specifically, how the money can be spent. If they spend less than their budget they have a choice of rolling the excess cash into the next week’s budget, or transferring to savings. As an incentive to save, offer to match their savings for every dollar they save above a certain amount (but they can’t touch their savings without your permission).

Set Savings Goals

Have them set savings goals for the things they want to purchase. You’ll have to agree on what is reasonable and encourage them to set aside a portion of savings for long-term goals such as buying a car. Using a personal finance site like, they can track their progress towards each of their goals.

Transfer Financial Responsibility

One of the best ways to learn about managing money is to spend it. Your teen thinks she can do a better job of shopping for her clothes than you; so, let her. But, in addition to letting her simply spending the money, you give her the responsibility of doing so within a budget. You can transfer the funds to her account and send her off with her debit card and a shopping list. Be specific with list, so she knows how she is to allocate her funds. For example, you might budget for 10 items – three tops, three pairs of pants, a pair of shoes and accessories. If she comes back having spent all of the funds on just three items, you need to talk about value and wasteful spending. Send her back until she gets it right.

Monitor and Measure Their Progress

Schedule a time each month to review their budget performance and savings goals. If they are on track, you could consider rewarding them with a small monthly bonus for their spending or savings account. If they are off track, discuss where they went wrong and discuss ways to get on track.

Have Them Join the Conversation

The biggest mistake many families make is to keep their teens in the dark on money matters. While they don’t have to be involved in any serious matters, they could be included in discussions on family spending, especially when they can play a role. Let them become an active participant in discussions on family goals, such as where to vacation or adding a swimming pool. When they feel they have a stake in it, they will take on more responsibility for achieving the goal. Another idea is to get your kids to participate in managing the family budget. For instance, the family can set a goal for spending on utilities. If the actual spending comes in below the goal, the kids can receive a portion of the savings as a bonus. You’ll have to get used to seeing your kids walking around the house to turn off lights.

Introduce Credit Early

The biggest problem that plagues young adults is mismanaging credit. Most kids don’t experience credit until the leave college, with just enough knowledge to make them dangerous. Introduce your teen to credit as early as possible.

When your teen turns 18, you should help them open up a student credit card. Student credit cards usually carry very low credit limits, and are relatively easy to qualify for. Alternately, you can open a subaccount under your account, but the card will be in your teen’s name. You will be able to monitor the account online. Establish clear guidelines for its use. For instance, it can only be used for emergencies or for spending on budgeted expenses that will be paid in full each month. They should make the payment on their account, but, because their credit activities will affect your credit, you should check each month to make sure the payments are made on time. If you have the child’s due date coincide with yours, it will be easier to monitor.

Other Posts around Teaching Children with Money

We have a few posts exploring childhood financial education. These posts are more focused on the younger aged kids. If you are interested in Games as a Childhood education tool try here. If you would like to look at the softer side of financial education for kids try here. Finally, if you are looking for an analysis of various approaches this post may help.

This Guest Post by Josh Wilson, a personal finance blogger, enthusiast, and a huge supporter of financial literacy in the classroom. Josh’s children are going to be the most financially savvy children in the neighborhood. 


  1. Mrs. Adventure Rich
    Mrs. Adventure Rich August 18, 2017

    I look forward to teaching our son about personal finance as he grows up! I especially like your suggestion to have kids join the conversation. This is something I wish I had when I was younger. I always saw personal finance as a fuzzy concept I would learn about later in life. Hopefully we will be able to prepare our son for his financial life early on!

  2. August 18, 2017

    I couldn’t agree with you more. Its a shame that personal finances are taught in our regular school system (before college) – so many would benefit from it.

    The course of work you laid out would be very useful, and your personal example will help a great deal as well.

    Mr. 39 months

    • fulltimefinance
      fulltimefinance August 20, 2017

      One can only help something changes. I have noticed more mainstream classes and awareness around finances recently. Though I worry how much is related to the current stock market situation rather then a long term shift..

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