5 Lessons To Teach Your Kids About Finance, According To Experts

When you're a parent, you want to share your wisdom with your children. There's no shortage of topics to school them on. Money should be at the top of the list. 

"Financial literacy is one of the most valuable lessons parents can pass down. These conversations should start early," says Zohaib Sunesara, a certified parenting coach and co-founder of parenting platform Cuddle Pixie.

Those lessons are sorely needed. According to a recent survey by Self Financial, 63% of those they polled said they didn't receive enough or any financial education growing up to set them up for financial success as an adult.

"Money is earned through hard work, problem-solving, and creating value," says James Comblo, CEO of FSC Wealth Advisors.

For younger kids, start with small tasks like chores (outside of their regular responsibilities) or a simple family project, such as a yard sale. "This gives them the opportunity to earn money through their own efforts," says Comblo.

There's something to be said for allowances. They create a work ethic. "For younger kids, assign simple chores like cleaning their room. For older kids, encourage part-time jobs or entrepreneurial activities like a lemonade stand," says Anna Yen, a certified financial analyst at MoneyLion.

Once they have a little change in their pocket, show them what to do with it. Introduce saving for short-term and long-term goals.

"Saving money teaches delayed gratification and the importance of planning for the future," says Yen. She recommends younger kids use a piggy bank or a transparent jar to deposit their savings so they see money grow. Older kids can open a savings account in a bank and set specific goals, perhaps a computer game, or something bigger, like a car. 

Tim Smith, a certified financial planner and founder of The Financial Dad podcast, suggests using the "3 Buckets" approach where your child takes one-third of earnings or allowance and saves it, uses one-third for charities, and keeps one-third to actually spend. Teens might prefer apps or spreadsheets to allocate their money.

The sooner your child gets the gist of this, the better. Spending without keeping this concept in mind leads to the financial downfall of many.

"Explain the difference between these concepts by classifying food, shelter, and education as essential needs and toys and luxury items as nonessential wants. This will help children prioritize spending and make thoughtful financial decisions," says Yen.

How to help them grasp it? Go on a shopping trip to the grocery store. Discuss purchases. Ask them questions like, "Do we need this, or is this something we want?" For example, eggs and vegetables are needs; the Oreos and chips, not so much.

"Credit equals borrowed money. And, borrowed money has to be paid back—with extra," says Cindy Kumar, CPA and owner of Elevated Accounting. Give them a test run. Let them borrow money from you to buy toys or other treats. Explain the basic purpose of credit cards and how they should be paid off monthly in full. "Stress that credit cards are for convenience, not financing long term," says Smith.

"Money isn't just for buying things; it's a tool to make the world a better place," says Comblo, who advises encouraging your kids to support causes they care about by giving a portion of their money to those organizations.

When children see money as a tool rather than a stressor, they grow up with a healthier, more confident relationship with it, adds Sunesara.

Then too, keep it real. Everyone makes financial mistakes. "Those mistakes are a crucial part of learning how to manage finances. Tell your children it's OK to make mistakes but to learn from them and not be afraid to ask for help," says Comblo. 

If they spend all their money on something and regret it, "that lesson sticks way more than a lecture," says Kumar.