Raising Money-Savvy Kids: Four Tools to Empower Financial Success
In an increasingly complex and dynamic world, the importance of financial literacy cannot be overstated. However, studies have shown that a significant number of Americans lack the necessary knowledge and skills to make informed financial decisions. Parents have a unique opportunity to shape the financial futures of our children and equip them with the tools they need to thrive.
In this article, we'll explore the significance of teaching financial literacy, supported by compelling research, and provide you with four easy steps to ensure your children grow up financially empowered.
The State of Financial Literacy
Recent data underscores the critical need for enhanced financial education among Americans. The National Financial Educators Council's 2025 National Financial Literacy Test revealed an average score of 67.4% among over 100,000 participants. Among younger participants ages 15-18, over half (50.7%) failed.
While these figures are an improvement since 2019 (which saw an average score of 64.94%), there’s still much work to be done. U.S. credit card debt reached a record $1.211 trillion in the fourth quarter of 2024. More than ever, individuals need know-how and practical advice to manage their finances, avoid overwhelming debt, and build a sustainable future.
Young adults approaching feel especially unprepared to manage their own finances. Among college students, 7 in 10 participants in a 2024 WalletHub survey reported feeling overwhelmed by their financial responsibilities. But they’re willing to learn, with 85% saying they would take a course in personal finance if it were available and they got credit toward their degree.
Four Easy Steps to Cultivate Financial Literacy in Children
Your kids don’t have to be part of that statistic — and you can start teaching them financial savvy early on with age-appropriate examples and explanations. Not only is this a chance to bond with your child and support their upbringing, but it will also provide invaluable knowledge they can rely on for the rest of their lives.
1. Lay a Strong Foundation.
Begin by teaching your children the basics of money management. Along with general mathematics that will be crucial for everything from future budgeting and calculating change to adding a tip for servers, introduce them to the value of money through regular discussions and simple, age-appropriate language about your own financial decisions. Reinforce the importance of delayed gratification and goal setting, encouraging them to save for something they truly desire.
Early on, this can be as simple as:
Earning
Spending
Saving
Goal-Setting
As your children mature, start introducing more complex topics, like:
Budgeting
Debt (comparing interest rates, credit vs loans)
Credit score
Taxes (what they are, deductions vs. credits, how to file)
2. Make Money Tangible.
Children often struggle with abstract concepts. To make financial literacy more relatable, consider using physical tools like piggy banks or clear jars to help them visualize their savings and expenses. Encourage them to allocate money to different categories such as savings, spending, and charity.
As they grow older, introduce them to the concept of a bank account — or even better, head to a bank and set one up in their name. Help them understand how they can deposit birthday and holiday money, grow their savings over time with interest, and withdraw their money later to make a worthwhile purchase.
3. Involve Them in Real-Life Financial Decisions.
As your children mature, include them in age-appropriate discussions about family finances. This can range from budgeting for a vacation to comparing prices at the grocery store to having them sit beside you as you file taxes for the year.
Some families will even hold family finance meetings to involve their children in the conversation and apply the concepts they’ve learned about to real-world decisions and results.
By involving them in decision-making processes, you demonstrate the practical application of financial literacy and empower them to make informed choices. Encourage questions, fostering a safe and open environment to discuss money matters.
4. Introduce Them to the World of Investing.
Investing is often considered an advanced financial concept, but it's crucial to introduce children to its potential early on. Instilling concepts like diversification, risk and reward, and data-driven vs impulse decisions can help them build confidence so they’re more prepared to tackle these decisions down the road.
Teach them the basics of investing through engaging activities, such as stock market simulators or fantasy investment games, where they can engage and learn in a safe space without real-world consequences. By nurturing their interest in investing, you pave the way for a future of financial independence.
As they age, look for opportunities to turn concepts into real-world applications. When your teenage child gets their first job, for example, you could introduce them to financial vehicles like 401(k)s or IRAs. While their part-time likely doesn’t provide access to a 401(k), it's still a timely opportunity to explain a type of investment that will benefit them in future employment opportunities.
Do you have a 529 plan for your child? As they approach their college years, make sure they know about their 529 plan and how the investment has been a savvy approach to grow savings over time and help cover tuition expenses.
Four Tools to Help Teach Financial Literacy:
When it comes to teaching kids financial literacy, there are excellent tools and websites available that can make the learning process engaging and interactive.
Here are four tools/websites that parents can use:
1. Money as You Grow - Developed by the Consumer Financial Protection Bureau, Money as You Grow offers a comprehensive roadmap for teaching kids about money. It provides age-appropriate activities, conversation starters, and lessons that align with various stages of a child's development. The website also offers practical tips for parents and caregivers to integrate financial education into everyday life.
2. Khan Academy - Khan Academy is renowned for its extensive collection of educational resources, and their personal finance section is no exception. This platform provides a range of interactive lessons, videos, and exercises that cover topics such as budgeting, saving, investing, and more. The content is suitable for both children and teenagers, making it a valuable resource for parents seeking structured financial literacy lessons.
3. Biz Kid$ - Biz Kid$ is an award-winning TV series and website that aims to teach kids about money and business. It features a combination of videos, games, and lesson plans designed to inspire entrepreneurial thinking and financial responsibility. The engaging content focuses on real-life scenarios and success stories, making it relatable and enjoyable for young learners.
4. Greenlight. Greenlight is an online platform that helps children learn about money management in a safe and controlled environment. It provides tools for setting savings goals, creating budgets, and tracking spending. Parents can monitor their children's financial activities, set allowances, and even provide paid interest to their kids. The platform promotes financial responsibility and empowers kids to make informed decisions about their money.
These tools and websites offer a range of resources to support parents in teaching financial literacy to their children. Each platform brings its own unique approach and features, making it possible to find the one that aligns best with your child's learning style and age. Remember, a combination of these resources and real-life discussions about money will help create a well-rounded financial education for your children.
The Benefits of Financial Literacy:
Empowering Decision-Making. Financially literate individuals possess the knowledge and skills to make sound financial decisions. By teaching our children financial literacy, we empower them to evaluate risks, weigh options, and make informed choices about spending, saving, and investing. This competence fosters independence and self-reliance, ensuring they are better equipped to navigate the financial complexities of adulthood.
Breaking the Cycle of Debt. Understanding financial literacy helps break the cycle of debt that plagues many individuals and families. By instilling in our children the importance of budgeting, saving, and avoiding unnecessary debt, we equip them with the tools to build a strong financial foundation. They will be more likely to make sound financial decisions and avoid the burden of excessive debt in their future.
Fostering Long-Term Financial Security. Financial literacy is key to building long-term financial security. When children are taught to save consistently, invest wisely, and plan for the future, they are better prepared to weather economic uncertainties and build a nest egg for retirement. Visuals like this can help convey the tremendous power of compound interest, and the advantage of starting as early as possible.
Parents have the incredible opportunity and responsibility to shape the financial well-being of their children. By equipping them with financial literacy skills, we empower them to navigate the complexities of the financial world confidently. The statistics speak for themselves—there is a clear need for increased financial education, starting at an early age.
Through four straightforward steps—laying a strong foundation, making money tangible, involving them in real-life financial decisions, and introducing them to the world of investing—we can provide our children with a solid financial footing for a successful future.
Financial literacy goes far beyond numbers and calculations; it is about cultivating smart, responsible, and confident individuals who understand the value of money and know how to make it work for them – not the other way around.
DISCLOSURES:
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
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