How well do today’s emerging adults do when it comes to managing money? For the most part, not as well as we would hope. But that can change. A multi-generational, interview-based project was conducted to better understand what and how parents are teaching their children about finances. Based on the What’s and How’s of Family Financial $ocialization project, researchers have drawn numerous conclusions to assist parents in addressing and shrinking the gap between financially literate and financially illiterate emerging adults.
In numerous interviews, emerging adults expressed regrets and reflections on what might have helped them feel more confident about and capable of effectively managing their money—in other words, what and how they wish their parents had taught them about money. Three core themes in their collective financial wellness wish list are Practical Knowledge, Financial Stewardship, and Open Communication.
In these same interviews, emerging adults discussed four core themes about what they planned to do in teaching their own future kids about money: Communicating Family Finances, Opportunities for Responsibility, The Value of Hard Work, and The Process of Saving.
These separate yet similar conclusions can easily be sorted into the Boy Scout acronym EDGE: Explain, Demonstrate, Guide, Enable.
Explain – Practical Knowledge and the Process of Saving
Above all else, emerging adults demonstrated in their interviews a hunger for practical financial knowledge, especially pertaining to budgeting. Their lack of practical financial knowledge resulted in anxiety around decisions pertaining to the best use of student loans, how to go about purchasing a home, determining appropriate kinds and levels of insurance, proper use of credit cards, how much to spend, how much to save, how and when to invest, and so forth. Some emerging adults recognized that their parents lacked financial knowledge, in which case they wished their parents had sought out the knowledge they did not have. Others recognized that their parents understood financial principles themselves but were not around enough to impart what they knew to their child(ren). Because of this deficiency in their own experience, emerging adults were eager to pass along this knowledge to future generations in their own parenting. In particular, they suggested parents explain the values of budgeting, thriftiness, saving, and investing.
Demonstrate – Open Communication, Communicating Family Finances, and The Process of Saving
Like conversations about sex, kids need more than just a one-time overview of what they should and should not do with their money. They need age-appropriate, ongoing conversations with their parents that can help them see the choices their parents have made and are making with money and why. The interviewed emerging adults acknowledged that some parents may be cautious about sharing too much about their finances because it could result in arrogant or excessively anxious children, but parents can still share age-appropriate generalities that teach about mortgages, interest rates, and other concepts without being too transparent (especially with young children). They suggested parents demonstrate frugality, self-control, and delayed gratification by their example of careful money management.
Guide – Financial Stewardship, Opportunities for Responsibility, The Value of Hard Work, and The Process of Saving
Emerging adults wish they had the chance to learn by experience how to manage money, from earning to spending to saving to investing. Many commented in hindsight that it would have helped them develop more money sense and responsibility if they were required to contribute to things like gas, car insurance, car crash repairs, and so on. Ideally, parents can be built-in advisors to help their child(ren) recognize and navigate financial challenges while kids are young and mistakes are less costly. They suggested parents reinforce the value of hard work by encouraging kids to find ways to earn money on their own. This could be done by babysitting, mowing lawns, or even putting up a lemonade stand. At the same time, parents can also reinforce the process of saving by encouraging their child(ren) to save what they earned for desired items or events, or even create a “bank of mom and dad” where the parents hold onto the saved money for the child and can even offer interest as an incentive to save more.
Enable – A natural output from investment in the three other areas
Research reveals that most emerging adults view financial independence as a more significant marker of becoming an adult than biological age.
As emerging adults gain knowledge about healthy financial practices, have access to ongoing conversations about money for counsel and advice, and are given the opportunity to manage their own money while the stakes are low, they learn through trial and error and are armed with confidence to separate themselves from the financial safety net of their parents and establish themselves independent of their parents financially. These early lessons are ideally suited for family environments.
In essence, emerging adults that participated in the project saw the need for financial education and training in the home that spans the full gamut of the teaching experience, utilizing the acronym EDGE without even knowing it. They wished they had been taught sound financial practices, such as budgeting, savings, investing and more. They wanted ongoing conversations, so they could digest practical financial knowledge based on their readiness. They wished they had been entrusted with financial decision-making as children and adolescents, so they could have gained the confidence that comes with experience. Finally, they wanted to offer these opportunities to future generations, so their lack of knowledge and understanding is not inherited by the rising generation.
1. We don’t know what we don’t know, so start learning. Make money matters an ongoing part of your learning as an adult. Take a class, read a book, talk to a bank representative, or pursue a variety of other options to increase your understanding of different areas within finance.
2. Hold family financial councils. Open the dialogue about family finances with occasional structured lessons, including role play and games, on topics such as wants versus needs, the time value of money, budgeting basics, and so forth. Consider special lessons that coincide with special events such as back-to-school sales, Thanksgiving, Black Friday, Giving Tuesday, Christmas, and more.
3. Create and welcome frequent, informal conversations about money. There is no limit on the number of places and times that you talk about money with your child. From simple chats in the grocery store to discussing what a child should do after they receive their first paycheck, there is always an opportunity to teach simple financial principles. Listen and respond with age-appropriate answers when your child has money-related questions.
4. When possible, let your child manage their earnings. Resist the impulse to control your child’s money. Instead, teach correct principles by word and by example, and let your child learn through the experience of earning, spending, saving, and investing money.
LeBaron, A. B., Hill, E. J., Rosa, C. M., Schmutz, C., & Spencer, T. J. (2016). Teaching finances in the home. In Paper presented at the annual conference of the work and family researchers network, Washington, DC.
 LeBaron, A. B., Hill, E. J., Rosa, C. M., Spencer, T. J., Marks, L. D., & Powell, J. T. (2018). I wish: Multi-generational regrets and reflections on teaching children about money. Journal of Family and Economic Issues, 39(2), 220-232. https://doi.org/10.1007/s10834-017-9556-1.
 LeBaron, A. B., Rosa, C. M., Mork, L. A., Hill, E. J., & Marks, L. D. (2018). Teaching children about money: Prospective parenting ideas from undergraduate students. Journal of Financial Counseling and Planning, 29(2), 259-271. https://doi.org/10.1891/1052-3073.29.2.259.
 Arnett, J. J. (2017). Adolescence and Emerging Adulthood (6th ed.). Pearson Education (US). https://online.vitalsource.com/books/9780134006086.