How to Raise Financially Responsible Children

Money habits start to develop early. As new parents, you may have questions about when and how to start educating your children about being financially responsible.

How children handle their money early in life, from early teens through college, can truly set the course for whether they will be successful or living paycheck to paycheck. According to a study conducted at the University of Illinois Urbana-Champaign, 36 percent of young adults are considered financially at risk. This may be the case because children are not properly taught about money.

John Lanza, an expert in making money learning fun for kids, and founder of The Money Mammals, strongly recommends to new parents that they start teaching children early about saving and spending so that they are well-prepared and can avoid financial mistakes at the stages in life when it matters most. He says, of all the things that get taught in grade school, a financial literacy class is not part of the curriculum. “It is shocking,” he says. “You can’t count on the schools to do this.” If you are a parent, here are some helpful tips on how you can take control and start raising financially responsible children.

Communicate about money starting at an early age.

Parents may communicate through The Money Mammals, which is a series of educational videos and resources developed to teach the value of money, saving money and how to make smart spending decisions. Lanza also wrote The Art of Allowance, which helps parents learn how to communicate to kids the importance of being money-smart and money-empowered at any age. Decades ago, parents took comfort in believing there would be pensions and other support when their children get older. “Now, it’s all up to you,” says Lanza.

Be open about the family finances.

Parents know how quickly purchasing “stuff” accumulates things that go untouched after a short period of time, says Lanza. When parents and children buy something new, they also need to think about taking something away, such as giving a non-used item to Goodwill. Being open about what the family can and can’t afford is important. Not having honest conversations about the family financial situation allows kids to draw their own conclusions and expectations, which may not be accurate. It is also important to discuss college expenses long before it may be time for kids to attend, so they understand the expense and whether they will be responsible for all or part of that expense.

Involve kids in your smart shopping decisions.

Children do learn beliefs about money from their environment and are influenced by even small decisions that parents make. If you show your children that you are looking for sales and waiting to make purchases until prices are reduced, it shows them that you are making thoughtful decisions, and also recognizing price and value. It is important to show children they do not get everything they ask for and items have value. “When they don’t understand the value of what they receive… that creates very bad financial traits that lead into teenage years and adult years,” says Andrew Rafal, President & Founder of Bayntree Wealth Advisors.

Provide an allowance.

According to Lanza, children can’t fully understand about money managing unless they actually have some money of their own and you must start with a small amount of cash. Rafal adds, we are in a cashless society now, from gift cards to one-click shopping on Amazon, and kids need to be taught about actual cash. While providing an allowance is a good idea, Lanza says it is not as effective to tie an allowance to routine chores. He says chores teach working hard for money, but the allowance has to be paid for duties that would not normally be completed as part of the household responsibilities. “There must be a “why” behind an allowance, and that it is for work that would not normally be done,” he says, such as washing the car, rather than making their own bed every morning. The purpose of the allowance is to distinguish between wants and needs and to teach saving money for goals.

Don’t be afraid to say “No!”

It is important that you do not give in to every request your children throw at you. If you continue to simply give in to avoid the hassle, you could be doing more harm than you realize. Giving in could influence future decisions by teaching children it is ok not to turn down one of their own desires, and then you are raising standards that they may not be able to sustain later on, leading to the reliance on credit cards.

Teaching your children to be financially responsible at an early age is attainable and it can set them up for a lifetime of stability and success. To learn more about how to raise financially responsible children, listen to How to Empower Your Kids To Be Money Smart, featuring John Lanza, creator of The Money Mammals and author of The Art of Allowance, and Andrew Rafal, President & Founder of Bayntree Wealth Advisors.  

If you have questions, schedule an appointment on our online calendar by selecting the date and time that is most convenient for you! You can also always reach us at

Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.

Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.


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