How to Teach Your Kids About Financial Literacy

In front of a brick wall with a white window, a woman kneels down to whisper into her daughter's ear.

Photo by Sai De Silva via Unsplash

According to a survey by the APA, 64% of Americans reported that money is a somewhat or very significant source of stress. But, this is especially true for parents of children below the age of 18 and younger, with 77% of parents, 75% of Millennials aged 18 to 35, and 76% of Gen Xers aged 36 to 49.

Many—probably most—schools don’t include financial literacy or personal finance in their curriculum, so our children aren’t being educated on how to take care of their finances. While they’re learning long division and the quadratic equation, they have no idea how to budget or invest!

As parents, this is where we come in when it comes to our children’s education: to fill in the gaps and prevent miseducation from having a lasting impact. And, as women in accounting and finance, our kids already have an advantage—this is what we do!

But, it can be hard to figure out at what age to start teaching your kids about financial literacy. Not only that, but where do you start? What is important for them to learn first? And, most importantly, how?

To spend money, you have to make money

One of the best ways you can get your kids learning about the importance of handling money is to have them handling their own money! Sounds easy enough, right?

But, the truth is that there are a few different ways you can go about this. First is the easiest: give them a weekly or biweekly allowance, similar to how payroll at a firm or 9-5 would work. This is a good idea for your younger kids in particular, since there really isn’t anywhere else that they’d be getting their hands on their own money.

There are pros and cons to this. A pro is that you’re getting your children started in managing their own finances in a way that is simple enough for you to handle as well.

But, a con is that they’re simply getting handed the money. They’re not earning it. Depending on the other lessons you’re teaching your children in your household, this could impact the way they view money and spending: as an infinite source that is given to them free of charge.

A toddler stands on a bridge in a park with her legs crossed and a smile on her face. On her t-shirt, it says: "Future Leader"

There's only one way she's going to get there—and that's with your help! Photo by Kiana Bosman via Unsplash

So, what’s another way to have your kids handling their own money without just passing them some bills? Have them earn it!

Sit down with your children and have them brainstorm a few ways they’d like to earn money.

This can be big or small: a lemonade stand in your neighborhood, take on extra chores around the house, or start a regular job babysitting their younger sibling (so you and your spouse can go out for an outdoor drink and drinks; everyone wins!). If they want to take it a step further, they could even open up their own Etsy shop and sell something handmade.

Bonus: this exercise can even get your kids fueling their own entrepreneurial spirit—it’s never too early to add more business professional women to your network!

Now, your younger kids may not be at the point where they can necessarily start working, even with something small. If you feel like they’re not quite there yet, start them out slowly by getting them handling money physically.

You know the drill: whenever you go to pay somewhere, have them help you count the money and pass it to the cashier. Is change involved? Have them help you count it.

Is this a situation where you have to tip? Talk to them about the tipping process, in simple terms, have them help you count it, and give the money to them so they can pass it to the worker who’s helping you.

Get them active with their financial fitness

One of the biggest issues surrounding a lack of financial literacy with children and young adults is that money is considered a taboo topic. People don’t like to talk about how much they make, what their monthly costs look like, what their budgeting regimen is—it’s something that we talk about behind closed doors, with people who are on a need-to-know basis.

But, this isn’t the case for women in accounting! This is our job; so odds are, we’re already talking to our children regularly and openly about money and finances.

So now it’s time to take it a step further. Don’t just talk about it. Be about it!

You’ve been talking to your children about the importance of financial hygiene, why they need to have a savings account, ways to avoid debt, strategies for creating multiple income streams. So now, you’ve reached the point where it’s time to put your foot on the gas—just a little!

A teenager has headphones on and is working on the floor with their laptop open, books open, and a pen in their hand. They have a look of concentration on their face as they write.

There's never a bad time to start teaching your children about money. But once you have a teen, the time is now! Photo by Soundtrap via Unsplash

For your older kids, there are a few things you can do here.

First, have them write down their financial goals. How much would they like to make in a year? How much would they like to save? Would they like to save up for something specific, or just have an emergency fund that they can allocate towards something in the future? Do they have any plans to invest? If so, in what?

Keep in mind that these aren’t questions for their future: this exercise is for the now. So have them be realistic. If your 14-year-old wants to start babysitting their younger sister to start working on their personal finance, having a goal of making $100K in one year isn’t going to happen—unless you’re ready to start shelling out some cold, hard cash of your own. (But that’s not what we’re doing here!)

Once they’ve written down their goals, it’s time to introduce them to the tools of the trade. That’s right ladies, we’re talking about something that women in finance are all too familiar with: Excel.

Plan an afternoon to sit down with your older kids and show them how to use Excel to do some basic tracking and budgeting. Even if just for exposure, have your younger ones join and watch—if they promise to be on their best behavior!

At this point, they won’t have a lot to track or budget. But it’s still important to get them started! Have them track their basic expenditures (food, subscriptions like Apple Music or Spotify, the occasional Starbucks run). From there, they can start budgeting as well.

A basic budgeting strategy that we like for our young ones is the 50/30/20 plan:

50% goes towards necessities: since they’re younger, they don’t have bills like rent or car payments, but you can get them started paying for their own subscription to something of their choice
30% goes towards savings
20% goes towards nonessentials, like going out to eat or new clothes

Conclusion

A woman and her child are forehead to forehead outside, with trees behind them. The mother is laughing and smiling while her child seems to have a sleepy look on their face.

We love them—which means we have to teach them. Photo by Bruno Nascimento via Unsplash

Especially in this last year alone, we’ve all learned that there’s a lot we need to do as parents to ensure our children are getting the most out of their education and preparing for their entry into the real world.

Getting your children started with their financial literacy early on is an invaluable tool for their development and success in the long run.

And as women in accounting, we’re more than well-equipped to help them gain this knowledge and level of independence.

What are you teaching your kids about financial literacy this month?