Please don’t raise financially illiterate children!

Raising little humanoids is difficult. At times they can drive you crazy. Other times they are adorable and fun. But how can we ensure they don’t make major financial mistakes? How can we set them up to be financially successful?

Growing up I don’t remember talking about money. It wasn’t until I became an adult and learned through experience that I realized how vital money decisions are for your wellbeing and future. I got married, and we had our first child when I was 25 years old.

The habits I developed early on continued through adulthood. I see the mistakes in my thinking, and I don’t want my children going through the same pain and suffering.

But how we can raise our children to avoid financial mishaps? Can we guarantee they won’t do the same things?

My Childhood

All I cared about as a child were the things I wanted to buy. I didn’t know what a budget was until later in life.

In middle school, I wanted to make extra money. I ended up passing around flyers to houses in my neighborhood advertising lawn services. During my best months, I brought in several hundred dollars doing lawn care.

As a junior in high school, I got a web development internship. I started at $10 per hour, which seemed like an insane amount at the time. Working as an intern was my first “job” experience.

At this point, I didn’t understand how money worked. I just figured people earned money and spent everything they had.

My home situation was never at a place where I felt comfortable. And no one talked about money. I knew my dad was working through medical school debt, but that was the extent of our money conversations.

I have an early memory in middle school where I wanted a new gaming console. I heard about people purchasing what they wanted with credit cards and paying it off over time. I convinced my dad to buy a gaming console, and I would pay him back over time. This experience was my first taste in spending more than I made and started a habit I struggled with through my early 30’s.

What should kids know?

Kids are watching everything we do. They look up to us, even if they don’t understand what is going on regardless of our decisions. If you are making good choices, if your kids aren’t aware of those decisions, there is no way for them to learn.

Learning how to Budget

There are millions of ways in managing a budget, and how your kids budget will change over time (like it does for most of us). However, the goal is not getting them to 100% follow a budgeting method, but to get them to understand the ideas behind managing their money.

What are the core ideas in managing a budget? Understanding how much money you have coming in, and organizing how you want to spend that money. It is about being financially aware of how we spend money, and understanding what we can buy is limited by what we bring in.

By teaching our kids how to think about how they spend the money they earn, we are setting them up with the following ideas:

  • The amount of money we make gives us more options on how to spend our money.
  • Money is something that we physically have, even when we store it in a bank. It is a limited resource based on our income.
  • Showing our kids the importance of prioritizing how they spend money. There are necessary expenses we will need to cover above everything else: housing, food, and utilities.
  • By assigning a “task” to every dollar that comes in, we gain better control over our spending.
  • Thinking about our long-term financial goals can help us determine how we should spend or save our money.

On a basic level, a spreadsheet might be good enough as a starter budget for kids when they approach the pre-teen or early teen years. Having them write down their priorities can instill a habit that will benefit their financial future.

Saving for the Future

Setting aside money for emergencies and larger purchases is a concept that would have changed my early adult life.

We don’t want our children to be scared of what might happen. But we want them to be smart. We can’t foresee the future, but by managing our finances wisely, we can be better prepare for what might happen.

When our children are younger, teaching them to save for more significant items they want can help develop good habits in saving money. As they get older and spend more money, the ideas of having an emergency fund become more straightforward to teach.

Spending Money Is Not Bad

In all of this money talk, it can be easy to form an idea that spending money is wrong and we should feel guilty about doing it. But this instills negative emotions about spending money, which is not what we want.

We want to encourage our kids to think about money, but not make them feel guilty about spending money on things they want.

Spending becomes about figuring out how we want to spend our money in ways that pursue our goals and makes us happy. But it is also essential to promote the idea that “stuff” will never make us happy. Money might give us access to things that we like to do and add comfort to our lives. However, having more or better material possessions are surface level pursuits and are not as important as the quality of our relationships and how we spend our time.

Enforcing the idea that money is a tool that can either work for or against us will help our children make smart choices.

Debt is Evil

Spending more than you make is a recipe for financial disaster. I’m of the opinion that credit cards can offer huge benefits when a balance is not carried month to month. But this can be tricky as it is easy to overspend and go into credit card debt unless you have the right mindset on avoiding credit card debt like the plague.

Talking about how credit cards work with your kids is vital. They should understand credit card companies want us to spend more than we make so they can make money on interest.

There might be times where debt is unavoidable, which includes purchasing a house, starting a business, student loans, and handling certain emergencies. But creating a negative outlook on debt makes it easier to handle these situations intelligently. The idea is that even if these things happen, avoiding debt can help open up options in the future.

Just because you can go into debt for something that might be worth it (house or student loans), doesn’t mean it is the smartest move. Just talk to doctors who have racked up massive amounts of student loan debt and how long it took to pay off those obligations (even with a high salary).


I didn’t take any classes in school that showed me how to manage money. Maybe this is different in other places. But we can’t depend on our education system to teach our kids how to make smart financial decisions. Or how to live life in general.

It is our responsibility as parents to instill the knowledge our children need to be financially successful, regardless of how much money they bring in.

I covered some of these already, but here is an extensive list on money-related concepts we will want our kids to understand before leaving the nest:

  • How to set up a checking and savings accounts, and the benefits/downsides of online banks.
  • Teaching them how to balance a checkbook and write checks.
  • Showing them how to manage a budget to track income and spending.
  • Setting up and managing a credit card.
  • Teaching your children the importance of creating secure passwords to access their online accounts.
  • How bill pay works and how it can save time and money.
  • Showing them saving small amounts of money over a long period can grow into a substantial number (compound interest).
  • If you have struggled with consumer debt, showing them how much you paid in interest over time can make them avoid credit card debt like the plague.
  • Understanding wants vs. needs.
  • Teaching your kids what financial freedom is and how they can reach that goal earlier than most people.
  • Showing them how the stock market works and what are index funds.
  • Teaching them how our tax system works and affects their take-home pay.
  • The importance of liking your job, and what this can mean for your career.

Include your Kids in Money Conversations

Talking about money and your budget in front of your kids can have a positive impact on how they look at money. Even if you are working through debt, having your children see how painful this is can help them prevent the same mistakes.

I want my children to understand their income limits the amount of money they can spend, and prioritizing how they want to spend that money can help push them towards their goals.

One thing I’ve started doing during our “kid date nights” is telling them how much money we have budgeted to spend for the evening, and let them decide how they want to spend that money. Giving control over the date funds encourages the idea money doesn’t come from thin air and helps them learn how to manage money.

Your Kids Will Make Mistakes

It would be nice if there were ways we could 100% guarantee our kids won’t make mistakes. But the best case scenario is they avoid financial disasters, but will probably still make some financial mishaps.

Instead of worrying about your children avoiding all financial mistakes, we should teach them to be aware of what is going on and learn from their bad choices.

They need to feel like you are not going to judge them for making bad decisions. Otherwise, they will avoid telling you what is happening. You want to build trust so your kids know that nothing they do can ever make you love them less.

When your kids believe we want the best for them, they are more apt to listen to our advice. But we shouldn’t look to micromanage every financial move they make. Asking critical questions such as “are you sure about spending money on this cheap toy is going be worth it?”

We need to give our children the freedom to make financial mistakes, but make ourselves available if they want help in figuring out what to do. If I had someone breathing down my neck about everything I did, I would be less likely to open up to them.


Kids are a huge blessing. There is nothing like seeing a version of yourself grow and develop to become a unique personality.

By communicating early with our children about how we want the best for them, helps build trust. And this trust can grow as they have kids of their own.

We want the best for our children, and we don’t want them making the same financial mistakes we made.

If you have kids, how are you teaching them about finances?

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