3 Ways to Instill Financial Values in Children


3 Ways to Instill Enduring Financial Values in Your Children

Leading by example is always a good idea, and the earlier you start, the better. These three lessons can get the whole family going in the right direction.

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Passing down values related to family wealth is one of the most crucial, yet challenging, tasks for parents today. Children’s experiences with money during their formative years can shape how they save, spend and give for the rest of their lives.

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What’s more, taking the right approach can ensure a family’s wealth is preserved through future generations. One recent study found that 70% of wealthy families lose control of their assets by the second generation, and 90% by the third. That’s a frightening prospect, especially when previous generations have taken so many steps to grow and maintain their wealth.

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By setting a positive example and having meaningful conversations with their children, parents can teach three key lessons about money management.

No. 1: Teach them how to save

Helping children think beyond current wants and desires is no easy feat, which is why demonstrating the value of saving up for something is best accomplished through concrete examples and exercises.


Here’s one example. Plan an exciting family vacation a few months out. Establish that in order to save enough money for the trip, the family will need to limit the number of times they go out to dinner between now and then. This small compromise increases the perceived value of the vacation when it finally arrives.

Of course, there are many other examples and exercises to teach children the value of a dollar saved, such as using coupons at the grocery store or having a loose change jar in the kitchen. The key is to explain these concepts along the way, so children both hear and see best practices in action.

Many families also expose their children to long-term savings by bringing them to appointments with their financial adviser. Most children simply sit in the waiting room. However, this trip gives parents an opportunity to explain that they are saving for retirement, planning for tax season or putting away money in a college fund. They can demonstrate that proper financial planning is important, complex and the reason they can provide a great lifestyle for their family.

No. 2: Teach them how to spend

Parents often debate the value of giving their children an allowance. When done in a disciplined way, an allowance can instill simple money management skills that children will carry with them for years.


For example, a colleague at Wescott Financial instituted an allowance program for her children when they were about 9 years old. She gave them enough lunch money for Monday through Wednesday each week, and instructed them to spend responsibly. If they splurged for an ice cream cone on Monday, they would not have enough to get their regular sandwich on Wednesday. As her children got older, she expanded this to a lump sum every week, and eventually it included an additional clothing allowance. In this way, she quickly helped her children differentiate between “need” and “want.”

As children grow up and their financial tendencies and spending behaviors become more apparent, parents may believe their kids would benefit from a more structured gifting plan, such as a trust. This can protect the estate in the event of a divorce or bankruptcy, but may be met with resistance from children. It’s best to have an honest family discussion about how and when the family’s wealth will be transferred.

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No. 3: Teach them how to give

Many philanthropic families believe it’s important to instill a sense of generosity in their children. While sending a charitable contribution in the mail each month can have profound impacts on an organization parents are giving to, it may not have the same effect on their kids. Children often benefit most from seeing, understanding and becoming actively involved from a young age.

Parents who donate their time to volunteer efforts can bring their children along, when appropriate. If a parent serves on a nonprofit board or committee, they can invite their children to attend a fundraiser or meeting. Families that have a foundation can make their children aware of it, and encourage involvement as they grow and mature. The key is to ensure their kids understand the impact of their work or donation.


Oftentimes, children don’t see the years of hard work and financial planning that led to their family’s wealth. But by teaching their children that wealth needs to be earned, saved and shared responsibly, parents stand a better chance of preserving their legacy for years to come.

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Grant Rawdin is Founder and CEO of Wescott Financial Advisory Group LLC. He founded the firm in 1987, which grew from the tax, business and estate services he provided to clients at Duane Morris LLP, a venerable AMLaw 100 law firm. Grant is an attorney, an accountant and a Certified Financial Planner™ and has served as adviser to many businesses, providing strategic, ongoing, and M&A advice. Grant and Wescott are recognized as leading the investment and financial planning industry in innovation, growth and size.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.