Raising Financially Responsible Children

Raising Financially Responsible Children

August 22, 2022

So many of the behaviors and patterns we carry into adulthood are formed when we are children—from how we handle stress to the way we fuel our bodies and especially how we manage money. How your children handle money early in life, then through their teenage and college years, can truly determine how successful they will be with money or if they will struggle living paycheck to paycheck. As parents, we only want the best for our kids, and teaching them to be financially responsible is one of the best ways we can do that.

Financially Responsible Children Turn into Financially Successful Adults

Unfortunately, there isn’t much financial literacy taught in schools, which is exactly why a 2018 study conducted at the University of Illinois Urbana-Champaign found that 36% of young adults are considered financially at risk. And according to the FINRA Investor Education Foundation’s 2021 National Financial Capability Study, financial knowledge matters:

“Respondents with higher financial literacy (scoring above the median on a seven-question financial literacy quiz) were more likely to make ends meet than those with lower financial literacy. They spent less than their income (53% vs. 35%) and set aside three months’ worth of emergency funds at higher levels (65% vs. 42%). Those with higher financial literacy were also more likely to have taken steps to plan for their long-term financial future by, for example, calculating retirement savings needs (52%, compared to 29% among those with lower financial literacy) and opening a retirement account (70% vs. 43%).”

So, how do we make sure our children grow up to be financially capable adults? We can start by teaching financial literacy at home with the great tips we’ve compiled below.

5 Tips for Raising Financially Responsible Children

1. Monkey See, Monkey Do: Be a Good Financial Role Model

Children are always watching, absorbing, and learning from the behavior that they see modeled by their parents (sometimes even the behaviors we prefer they wouldn’t). It’s not different with finances. Children watch and learn how their parents and other adults handle financial situations and start to build their own relationships with money in this way. That’s why it’s critical to demonstrate positive behaviors from the start.

Here's a personal example from Alex. As early as she could remember, her parents would give her money for earning good grades in school. Each report card that came out, an “A” was worth $100 and a “B” was worth $50. If Alex chose to save her money, her parents would match that amount and put it in a high-yield savings or money market account for her to use toward the purchase of her first car. If she chose to spend the money, she would forfeit the match. Typically, she said she would keep a portion to spend on something she wanted but saved the majority to receive the extra match in savings.

2. Think of Creative Ways to Get Your Child Involved

Talk is cheap. You can harp on the importance of spending less than you earn and saving for the future all you want, but it may be difficult to get the point across. Getting your children involved, though, in a way that interests them, can work wonders.

One popular idea is to open a small investment account and let your children pick all or some of the investments in the portfolio. Don’t worry about them picking winners, it’s more about them being involved in things that interest them. Teenagers might choose to invest in social media platforms while your nine-year-old might want to invest in the company that manufactures Legos. Each month, show them their monthly statement for a great and consistent teachable moment.

Other ideas could be contributing to a charity through a Donor Advised Fund or helping them open a credit card once they are going off to college. Each of these activities allows you to teach them about what they are doing and shows them the benefits of doing so first-hand.

3. Give Them a Chance to Build Good Habits with an Allowance

Giving a regular allowance can be a great way to compensate your children for extra chores or help given around the house as well as a way to teach them how to manage their own money. An allowance gives everyday opportunities for your children to practice money management skills. They learn what things cost, how far their money will go, and what is really important to them each week when it comes to their spending. Is spending $200 on a haircut worth not being able to eat out with friends for the next week? These are questions that we must answer as adults everyday. An allowance gives your child the chance to start flexing these muscles early, making it easier as they get older not to overspend.

You can do this with other things besides cash, as well. For example, when [name’s] daughter started driving, he told her that her allowance would consist of one tank of gas per week. If she went over, she had to use her own money to buy more or she simply wouldn’t be able to drive anywhere until the next week’s “fill-up” rolled around. She learned very quickly that her friends should share in the driving responsibilities or contribute to the gas fund if she was the one constantly driving. The added bonus is that she also learned how to set boundaries with her friends who were always looking for a free ride.

4. Sets Goals They Can Visualize Using Apps or Even a Vision Board

Visualization is a powerful tool for goals of all types. When it comes to learning about money, visualizing goals using apps or even physical vision boards can make the process engaging and fun.


Two of the most popular apps for kids are called Saving Spree and Kids Money. Savings Spree is a game that provides virtual experiences to earn money, rewards good spending choices and encourages them to think about investing their money or make charitable donations. Kids Money encourages saving for a larger purchase like a new bike or iPad. The user enters their goal amount along with the amount of money they are saving each week and can track their progress toward the goal. The app also gives them a timeline, based on their savings rate, of when they can expect to achieve the set goal.


If you are a less digitally focused family, create a vision board with graphics of the money goals. Then, provide milestones the child can fill in as they get closer and closer to their goal. Constantly seeing the vision board reinforces the goal and filling in progress toward the goal as it is made helps keep them motivated and confident in their ability to achieve.

5. Don’t Make Money Taboo

Families that don’t talk about money tend to raise children who understand very little about it; and these financially illiterate offspring often struggle later in life as a result. Of course, you don’t need to provide all your family’s financial details to your children, but keeping them in the loop on basic matters could help them make better future decisions when they are out on their own.

Teaching your children to be financially responsible from an early age is not only a great way for you to interact with and pass some knowledge down to your children, but an amazing opportunity to set them up for a lifetime of stability and success.

At RiversEdge Advisors, we are all about family and believe that the parents and children of our clients are also our clients. Working with the entire family makes financial sense for everyone involved. As your advisor, we aren’t just here for you, but for your family members, as well.

If you’re looking for a financial advisor who works alongside your family, we encourage you to reach out. We would love to discuss if we are the right option for you and those most important in your life.