Tips for Raising Financially Responsible Children

Posted by on August 20, 2024

Teaching high-level concepts such as investing, budgeting, and philanthropy might appear ‘too advanced’ for children, but there are many accessible and age-appropriate ways to introduce these concepts to kids. Cultivating good saving and spending habits can start as early as toddler age, and the more they are discussed and implemented, the stronger their foundational understanding of financial wellness will be. Read below for a few tips and examples of how to plant these seeds for financial responsibility from an early age:

Lead by example:

• Discuss the difference between items you are purchasing as it relates to needs vs. wants
• Openly share different budgets that you have as a family (i.e. grocery budget or ‘fun’ budget – funds used for entertainment)

Start early:

• Discuss how a piggy bank works for saving
• Introduce games that use ‘play money’ such as Monopoly, Pay Day, Life, etc. Fun fact - the US Mint also offers educational games to aid in explaining early money concepts.

Create savings plans:

• Involve your child(ren) in the building of your family savings plan. For example, if you are planning a family vacation, include your child in the conversation about how much will need to be saved, and what a timeline for that savings could look like.
• Create a college savings account (as early as when your child is born) and discuss with them how money can ‘grow’

Introduce budgeting:

• Give your child a “snack budget” and have them select snacks at the store within that budget
• Gift cards are a great way to practice budgeting for children

Encourage philanthropy:

• Get your children involved in volunteering and learning about how non-profits contribute to the community
• Involve children in selecting charities to donate to. Younger children could select from a couple of choices given by parents, or older children and teens could use resources and research charities that interest them. A great tool is Charity Navigator!

Encourage investing:

• Introduce the concept of investing and the importance of making smart financial decisions early. The Stock Market Game is a great tool to accomplish this goal.
• For older children and teens, as they begin working part-time, discuss putting a portion of each paycheck away into an invested account, such as a high-yield savings.

Provide applicable experience & real-life examples:

• Allow your children to earn allowance through household tasks
• Having children pay for a small portion of a larger purchase (i.e. a video game console or trampoline) can improve their understanding of spending and saving

Overall, the more integrated financial topics such as saving, spending, and giving are in daily life, the stronger your child’s understanding will be. Laying groundwork from an early age to increase children’s competency around money is something small you can do that will have life-long effects.

Disclaimer: This post is for informational purposes only and is not to be considered investment, tax, or financial advice. Cornerstone does not and cannot guarantee the accuracy or applicability of any information presented in this post regarding your individual circumstances. Please review your personal situation with your tax and/or financial advisor.

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