5 Practical Ways to Teach Your Kids About Finances

According to a Cambridge University study, children develop money management habits by age 7. This shocking discovery proves that it is never too early to begin teaching finance to your children – whether they just entered kindergarten or are about to head off to college.

If you’re a high-wealth family, there’s even more pressure to instill good money habits in your children while they’re young. They’ll be stewards of your wealth one day, and you’ll want to make sure they’re fully prepared for the responsibility. 

In our almost 50 years of helping families develop a financial roadmap, we've learned this question of how to prepare children for financial responsibility comes up with regularity. Below are 5 practical ways you can teach your kids about finances, so they’ll be ready to continue your legacy after you’re gone. You can use these tips with kids of any age; obviously, the level of detail you go into will depend on their maturity level. Be flexible, take the long-range view and unveil further detailed elements as they get older.


Linscomb & Williams has helped generations of families with their financial planning. Contact us to see how we can help you too. 


1. Talk, Talk, Talk … And Then Talk Some More

As with most things in life, the key to success is open communication. If you don’t regularly talk to your kids about your finances, they’ll never have a clear picture of what good money habits look like. Instead, they’ll turn to their friends – or worse, the TV – for answers on what they should and shouldn’t do with their money.

Set aside time at least once a week to sit down with your children and just talk. Talk about your family’s heritage, how you built your wealth, how you felt about money when you were young, the financial concerns you faced growing up, the concerns you face now … all of it. 

Ask your children for their input on certain financial decisions. For example, if you plan on donating to a charity for the holidays, ask them what charity they think you should give to. When they answer, ask them why that charity is important to them. 

By having these regular talks, your children will feel like their ideas are respected, and they’ll respect your ideas in return.

2. Teach then how to spend, save and give

When your kids earn money, help them divide it up into the important categories: Spending, savings and giving buckets. Take it a step further by rewarding them specifically for saving and giving. For example, you might agree to match these two buckets dollar-for-dollar at the end of every year. 

While you’re teaching them these concepts, stress the importance of delayed gratification. Explain how they’ll have to give up things they want now to get what they truly want later on. 

Of course, the specific application of this principle will depend on your children’s ages. For a 10-year old, the lesson may be as simple as passing up cheap toys and candy to buy a video game system. If they’re 15, it may be foregoing the latest smart phone to save for a down payment on a car when they turn 16.

3. Encourage Children to earn their own money

Once your child understands the basics of spending, saving and giving, it’s time for them to put it into practice with their own money. Instead of paying your kids an allowance for routine chores they should do anyway, consider paying them for tasks that go above and beyond. 

Pay them a few bucks for washing the car. Teach them how to cut grass, then encourage them to mow the neighbors’ lawns for some extra cash. If they take care of the family dog, encourage them to capitalize on this by offering pet sitting services to neighbors when they’re out of town. 

Help your kids uncover their skillsets, and then teach them to think about how to turn it into income. The earlier they develop an entrepreneurial mindset, the more financially stable they’re likely to be.

4. show them how to invest

It’s never too early to teach your kids about the magic of compound interest. For younger kids, matching their savings buckets dollar-for-dollar is one way to teach this concept. If your kids are a bit older – say, late middle school or early high school – open up a pretend investment account and let them “manage” their own portfolio. Once they start earning their own income, take it a step further by helping them invest a little bit of it.

As they become more engaged, teach them advanced topics like portfolio rebalancing, dollar-cost averaging, asset allocation, market volatility, risk versus reward, and more.

If you really want to drive home the power of investing, help your teen open a Roth IRA if he or she has earned income from an eligible employer. It may seem odd to recommend a retirement account to a teenager, but it has its perks, and teaching the value of long-term compounding is one of the most important. 

Roth IRAs are important because any money saved in this account won’t jeopardize future college aid. (A good education can be expensive!

Even better, the contributions will grow tax-free, they can withdraw up to $10,000 for a down payment on their first home and they can draw on the principal balance at any time without paying a penalty.

5. discourage the entitled mindset

We all want our kids to have the best, but it is important that your children mature financially, and growing up with a feeling of being entitled can be dangerous. One step you can take to discourage this mindset is to always drive home the fact that someone worked hard to build what you have (whether it was you or someone before you). 

Teach your kids the importance of being good stewards of wealth. Encourage them to get a job and earn their own money. Explain to them that there are no free rides in life. They may not like these little lessons at times, but the hope is they will grow up to appreciate the hard work you put into raising them and teaching them financial responsibility and accountability. 

How We Help

Every parent wants their child to grow up to be happy, successful and financially secure. But for high-wealth families, there’s even more pressure to teach your kids good money habits because they’ll inherit your wealth after you’re gone. 

At Linscomb & Williams, we’ve spent decades helping high-net-worth families establish a legacy that spans generations. Whether you need help planning your estate, creating a philanthropic giving strategy or getting the kids involved with your financial plan, we’re here to guide you every step of the way. 

To learn more about who we are and what we do, contact us today


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J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams is Linscomb & Williams' Chairman.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.