How to raise financially responsible children

Rochelle WarriesLatest, Rochelle Writes

We often hear that “It takes a village to raise a child”  as this is no easy task. We send our children to school and university to educate them, but they are seldom taught personal money management in these institutions. Many adults have never had a money conversation with their parents, and this has resulted in generations making fundamental financial mistakes.

Introducing children to money at age-appropriate intervals is critical. Here are some ideas on how to raise a generation that budgets, borrows responsibly, saves for the future, and invests to create generational wealth.

1. Start early

Teach basic money management skills and the value of money to children from an early age. You can introduce kids to money topics as early as when they start to count.

Money is simply numbers and a tool to buy what you need or want. So get them thinking about money’s purpose with a toy cash register – kids love those. Another option is Monopoly.  I still love it at my age, and I absolutely adore being the bank. However, if you can’t afford a fancy toy, make your own money bills and play shop owner and customer.

2. Lead by example

Children learn from their parents, so setting a good financial example is important. We inherit many of the traits our parents displayed to us. If your parents were impulsive spenders, chances are you will be an impulsive spender. Our children are always watching us, so be cognisant of the money behaviours you project, especially during the formative years between five and thirteen.

3. Give an allowance

Consider giving children an allowance to manage on their own, allowing them to make spending decisions and learn from their mistakes.

You do not have to give your child a huge allowance for them to learn from their mistakes. On the contrary, starting them with a small allowance will force them to be creative. An allowance must be earned, so assign age-appropriate tasks. When my daughter was as young as five, her job was to make sure all the bathrooms always have toilet paper in exchange for her allowance.

4. Teach budgeting

Teach children about creating and sticking to a budget and help them understand the difference between needs and wants. Budgeting is one of the most important life skills you need to teach your children. There is not a bottomless pit of money, so distinguishing between wants and needs is critical. If your child wants a toy, teach them that you need to budget for it first. They will get it, just not immediately.

5. Encourage savings

Savings enable us to get what we want later, so encourage children to save a portion of their allowance or gifts and help them set savings goals. This will also teach them patience and deter them from spending recklessly.

6. Talk about money

Do not leave money conversations up to other people. Have open and honest conversations with your children about money and financial matters. Some topics are easier than others, but do not shy away from any of them because you believe it is not appropriate for kids to have these discussions. Talk about life insurance, wills and healthcare with kids at the right times. It is easier to hear about these topics from people that you love.

7. Provide opportunities to earn money

Encourage children to find ways to earn money through part-time jobs, chores or selling items they no longer need. This will also assist them with financial discipline. You learn to appreciate things more if you work for it and it’s not handed to you on a silver platter.

8. Introduce financial products

As they get older, introduce children to various financial products such as savings accounts, investment options, and credit cards. I started allowing my daughter to pay at checkout counters from a young age. She was so scared she will make a mistake, but I knew that she needed to understand how to do this. It sounds simple, but kids will never learn if they are not exposed to financial products.

9. Discuss financial risks

Money comes with inherent risks, so teaching children about potential financial risks and how to avoid them is crucial. Teach them about buying property in the wrong area. You can sneak in this discussion during Monopoly or Ticket to Ride. Teach them about losing money and the risks of gambling. My daughter understands stock charts being red and green and what that means for the investor.

10. Taxes

Teach children about the concept of taxes. You don’t have to eat 50% of their ice cream, but children need to understand that they must contribute to the upkeep of the country that they live in.

I introduced taxes to my daughter in a positive manner. “We are very blessed that mommy has a job and can afford hospitals. Many people cannot afford hospitals and taxes help the government to take care of them. We also need to take care of the elderly, so paying taxes helps us to take care of those who cared for others and can no longer work”. She still thinks taxes are not cool, but she understands why.

Remember, the key is to provide children with hands-on experiences and continuous guidance as they grow and develop their financial literacy.


Rochelle Warries is a qualified chartered accountant with 16 years of experience and a seasoned stock market investor. Her passion is helping novice investors build healthy investment portfolios through financial education.

She is founder of Soul Financial, a website offering financial education and coaching. You can find her on Twitter: @soulfairy3