4 Ways to Teach Your Children Financial Responsibility
Set your children on the path to a lifetime of financial stability and fiscal responsibility by helping them learn these four fundamental money lessons.


Americans are facing a personal finance crisis. Almost 60% of all working age Americans have no retirement savings. And dealing with unexpected expenses can be a hardship for many families without savings. In fact, 4 in 10 adults could not cover a $400 emergency expense.
We need to make sure the next generation is better prepared, and that means helping children form healthy financial habits and relationships with money at a very young age.
The good thing is, most parents understand this need. Edelman Financial Engines recently surveyed 1,000 parents and found that over half (56%) believe children should start learning good financial habits when they are between 4 and 8 years old. Nearly half (49%) of parents also said their greatest difficulty talking to their kids about money is doing it in a way the kids would understand.
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In my new children’s book, The Squirrel Manifesto, my wife, Jean, and I tackle this problem head-on and give parents an easy way to talk with their kids about how to form good financial habits. We equate it to the way squirrels gather nuts to prepare for winter, eating some nuts now and storing some for later.
These are the four important lessons we believe children need to learn to be set up for financial success throughout their lives:
Tax a Little
The first time most of us learned that we don’t get to keep everything we earn was when we saw our first paycheck and wondered why the government was taking so much of our money.
Children need to learn from an early age that they don’t get to keep everything they earn. Consider withholding one-third of a child’s earnings and call it a tax, so they get used to the concept. Parents can put these “taxes” into a savings or investment account and hand over the funds when the child is ready to pay for a big purchase, such as college tuition or a car.
Spend a Little
It’s important to let children experience the joy of buying something they want with the money they earn or receive as a gift. Being able to purchase a comic book, toy or piece of candy will help them develop a positive relationship with money and teach them valuable lessons about how much things cost and how much they’re worth.
Save a Little
Most of the time when parents talk with their kids about money, it’s in the context of saving. In fact, our survey found that 86% of parents have this conversation with their children.
One practical way to teach children the importance of saving is by helping them set aside money for a big-ticket item, like a bicycle or electronic device. When children are trained at an early age to save toward larger purchases, they will develop the right mindset and self-discipline to save for future life milestones, such as buying a house or retiring.
Give a Little
Children need to be taught at a young age that they have a responsibility to give back by supporting worthy causes or helping others who are less fortunate. For every dollar a child receives, parents should have a conversation with them about what portion should go to philanthropy. The percentage should be material, to reflect true sacrifice, and applied consistently to all money the child earns or is given. Children should be empowered to decide who receives the money, whether it is a charity, a church or a friend in need. By developing a sense of philanthropy early in life, children will come to appreciate that the greatest joy in spending comes from supporting and caring for others, not spending on themselves.
Teaching children these fundamental money principles at an early age will set them up for a lifetime of financial security. As we say in our book, “If we save just a little, a couple nuts at a time, it leads to what matters: Squirrel Peace of Mind.”
To learn more about my new book or to purchase a copy, visit EdelmanFinancialEngines.com.
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