Three Ideas: Guiding a Child to Wise Financial Choices.

By Tim Flick, CFP®

Everyone seems to agree that financial education for children is important.  The lack of training can be obvious and the benefits are numerous.  Some of the significant byproducts of training children money management skills are:

  1. Wisdom
  2. Character Development
  3. Learning Contentment
  4. Generational Impact

Use it or lose it.  One of the challenges is financial literacy is similar to learning a foreign language.  You can talk the talk and pass the tests, but then it becomes “use it or lose it time”.  Children don’t have the opportunities to use this knowledge like an adult.  The necessity of practicing financial principles isn’t present.

Start with the big picture principles.  The key is to begin with foundational wisdom.

Teach general principles like:

  1. Spend less than you earn
  2. Avoid debt
  3. Saving – Build liquidity
  4. Set long-term goals
  5. Giving – Delight in generosity
  6. Understand that God owns it all – we are the managers

The rest can be taught in a “just in time” or “next step” manner.  For instance before a child goes to college, talk about the credit card offers they will receive.  Teach how credit works with the paying of interest making the items we purchase much more expensive than the price shown for the article.

Three ideas to build the foundation:

  1. Three cups – Give a child three cups to place in their room. Label the cups “Giving”, “Saving”, and “Spending”.  Then, every time the child receives money, have them put 10% each into the “Saving” and “Giving” cups.  The remaining 80% goes in the “Spending” cup.  Help the child find a church or charity for the giving portion and encourage them to be involved.  Also help them discover a long-term goal for their savings and even open a savings account.  The “Spending” cup is for them to decide how to spend and learn from, even as they make mistakes.
  2. Provide a match. To encourage savings, you can match the amount they decide to put into a savings account.  You may want to set limits for some over achievers.
  3. Have them earn an allowance. Give them age appropriate jobs and if they do the work, they get paid.  If they don’t, they don’t.  You may even want to come up with a fun tracking system.  I’ve heard one family uses Popsicle sticks.  One end says, “To Do” and the other end “Done”.

Finding a good “Second Voice”. The responsibility of training the child in finances falls squarely on the parents.  As many know, it’s always better with help from a like-minded resource. Hopefully, you can find support from family, friends, resources, and encouragement from church, school, and your financial advisor.

There are some good resources out there for teaching kids about money.  Check out:

The benefits are not only numerous for your own children, but can have an impact on generations to come.  Generations that may include your grandchildren and great-grandchildren.  Let’s start a new trend of financial wisdom.

Tim Flick may be reached at 317-947-7047 or