Raising Financially Literate Children

In this month’s Between The Lines column in the South China Morning Post, I wrote about financial literacy for children, offering both practical and philosophical guides for initiating these important discussions with adolescents:


Financial literacy is as important to teach our children as is any other kind of literacy, and yet many of us shy away from candid conversations about money with our children. In so doing, we miss an opportunity to instill family values and to cultivate positive traits like generosity, patience and perseverance.

When I lived in Santa Monica ten years ago and had young children, I was pleased to see many teenagers in my neighborhood who could babysit. Talking to their parents, however, I was told that they were too busy and they didn’t need the money. I was astounded. Babysitting was my route to financial autonomy when I was in High School. I babysat for a dozen different families who paid me about a dollar an hour. I saved my money and thought through my purchases carefully, always hesitant to part with that hard earned cash.

Wanting to impart the same lessons to my own children, I attempted to introduce an elaborate plan to teach my first born about money. I gave him three dollars each week allowance and insisted that he put one of each in three separate envelopes labeled “spend,” “save,” and “donate.” The problem was, he wanted a toy that cost $30. At that rate it would take him so long to save enough to buy the toy, he would have lost interest (an important lesson in itself, but not the one I was trying to teach). At that age, was waiting five months really teaching him anything about financial management? I soon abandoned my allowance plan.

Ten years later many wonderful resources exist to guide parents through allowance strategies that are more successful because they are both practical guides and they help parents initiate conversations about underlying values associated with stewarding wealth. In this broader values-based conversation that incorporates lessons about gratitude, generosity and responsibility, raising financially aware children is easier and more meaningful.

Last year, New York Times money columnist Ron Lieber released a book entitled The Opposite of Spoiled. Raising Kids Who Are Grounded, Generous and Smart About Money. This book offers practical tips for the best way to handle basic financial transactions including everything from allowance to donations, birthday presents to cell phones and more. It also helps parents to identify and instill traits and virtues that embody the opposite of spoiled. He says, “when parents shy away from the topic, they lose a tremendous opportunity—not just to model the basic financial behaviors that are increasingly important for young adults but also to imprint lessons about what the family truly values.”

Raising Financially Fit Kids by Joline Godfrey and Money Doesn’t Grow on Trees by Neale S. Godfrey are two more excellent books that walk parents through the process of raising financially literate children. The website www.jumpstart.org is a practical resource offered by a coalition of diverse financial education stakeholders working together to educate and prepare youth for life-long financial success.

It’s never too early to begin to introduce the concepts of wealth stewardship to children. Children’s picture books can be a terrific way to initiate discussions about money management and generosity. The Penny Pot by Stuart J. Murphy focuses on using math in everyday life and comes with oversized coins to help them do so. Lemonade in Winter by Emily Jenkins is a great read aloud picture book about entrepreneurship and the costs of doing business.

For teens and adults, the 1926 classic by George S. Clason, The Richest Man in Babylon uses ancient parables to discuss wealth management and might be a good option for both parents and teenagers to read to begin a deeper, more philosophical discussion about affluence and values.

Conscious stewardship of wealth is as important a skill to impart to children as are manners and kindness. A local Hong Kong philanthropist explained that his motivation comes from witnessing his father’s own generosity and from Confucian teachings to take care of one’s family. Christian values also encourage generosity and restraint in the accumulation and dissemination of wealth. Whatever the source, teaching children that money should be spent wisely, given generously, and shepherded carefully will help inculcate valuable life skills and positive character traits.

Sometimes the benefits can accrue directly to the parents. For example, I love my dog, but I really dislike is the early morning dog walk. This summer my youngest son and I came to an agreement. If he would do the morning dog walk, he would be paid $10/week. For him it is a source of pride, gets him up and out for a good long brisk walk around the neighborhood, teaches him responsibility and has awakened a new understanding. He has started to consider purchases in terms of what percentage of his weekly earnings something costs. When he realized that buying a trinket at the market cost over half of his weekly earnings, he quickly stopped pestering me about it.