Any parent can attest to the challenges of teaching their children good principles and practices. Indeed, children do not always listen to, remember, or follow the guidance that parents give—no matter how beneficial that guidance may be. Parents may wonder whether or not their efforts are worthwhile.
Because money can be taboo and a difficult topic to help children with, parents may wonder “is it truly worthwhile to teach my children healthy financial habits?” In short, the answer is an overwhelming, “YES!” Just as it is important to teach children healthy social, educational, and work-related habits, it is important to teach children about finances. Multiple scientific studies have supported the idea that parents have a significant impact on their children’s financial future, so parents are often the ideal candidates for teaching their children about money.1,2,3,4
Knowing that parents have a large impact on their children’s financial future leads researchers to ask questions that might help parents in these endeavors, such as “in what ways do parents influence their children’s financial development?” and “what are the best ways to teach children about money?” Dr. Bryce Jorgensen and his colleague helped answer these questions in a study.5 These researchers focused on four key points related to parent-to-child financial education: financial knowledge, attitudes toward money, financial behaviors, and perceived educational influence. To test and measure these factors, Dr. Jorgensen created an online survey and analyzed the answers from 420 young adult college students.
These researchers found that those participants who reported more financial education from their parents tended to also show a healthier attitude toward finances. A healthier financial attitude, in turn, predicted more healthy financial behaviors. In other words, those who felt they had received an abundance of financial education from their parents tended to have a healthy view and understanding of money and, in turn, had healthier financial habits.
Develop and maintain healthy financial habits. As with other important topics in life, your financial knowledge and routines will take time and experience to develop. Adding to this, your ability to effectively teach your children about finances may require you to learn and practice more than what you have already done. It is in your children’s best interest that you continue to learn and improve your financial habits. Likewise, previous research has repeatedly found that parents are the primary role models when it comes to their children’s financial learning. To help set your child on a healthy financial path, it is paramount for you, as a parent, to learn, practice, develop, and maintain healthy financial habits. Doing so will, hopefully, provide you with more confidence in educating your children about this topic.
Take time to teach your children about finances—both implicitly and explicitly. The study showed that children benefitted from both implicit and explicit teachings from their parents. When compared to participants who did not feel that their parents had educated them about finances, those participants who did report being taught by their parents had healthier financial practices, healthier financial attitudes, and greater financial literacy. In no uncertain terms, teaching children about finances when they are still in the home profoundly benefits them when they move out and take control of their own finances.
However, as parents begin the journey to educate their children about finances, they may feel inexperienced or lacking in their ability to do so effectively. For example, a parent may know that investing in the stock market is important for retirement, but they may not know how to go about investing. In these cases, it may be better to use implicit instruction, rather than explicit instruction. In this example, implicit instruction may involve telling your child that you want to learn about how to best invest for retirement. Perhaps as the parent seeks out professional financial help from a financial planner, they could tell their child about their visit(s) with the expert, what they learned, and what they did to improve their finances. Actions like these can set an example of how to further develop financial knowledge and skills.
Parents might best teach their children about finances through explicit teaching (directly teaching children about financial principles and how to practice them) when a parent knows and actively practices a healthy financial habit. For example, when a parent knows how to save money through an account at a bank, credit union, or other financial institution, they can pass that knowledge on to their child by talking with them and even opening up a savings account in the child’s name for their child to use.
Be aware of your attitudes towards finances and money. Results from the study showed that parents’ attitudes toward financial topics heavily influenced the attitudes of their children. Those young adult participants who exhibited a healthy view of money also exhibited healthier financial behaviors than those participants that did not have a healthy view of these topics. In other words, being aware of your attitude towards money and taking steps to maintain a healthy view may be another way to help children learn and develop their own financial attitude and their own healthy money habits.
1Alhabeeb, M. J. (1999). Allowances and the economic socialization of children. Association for Financial Counseling and Planning Education, 10(2), 1–9.
2Clarke, M. D., Heaton, M. B., Israelsen, C. L., & Eggett, D. L. (2005). The acquisition of family financial roles and responsibilities. Family and Consumer Sciences Research Journal, 33(4), 321–340. https://doi.org/10.1177/1077727X04274117
3John, D. R. (1999). Consumer socialization of children: A retrospective look at twenty-five years of research. The Journal of Consumer Research, 26(3), 183–213. https://doi.org/10.1086/209559
4Chen, H., & Volpe, R. P. (1998). An analysis of personal financial literacy among college students. Financial Services Review, 7(2), 107–128. https://doi.org/10.1016/S1057-0810(99)80006-7
5Jorgensen, B. L., & Savla, J. (2010). Financial literacy of young adults: The importance of parental socialization. Family Relations, 59(4), 465-478. https://doi.org/10.1111/j.1741-3729.2010.00616.x