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.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
The Most Tax-Friendly State for Retirement in 2025: Here It Is
Retirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Plan for Higher Health Care Costs in 2026: Projected Medicare Part B and Part D Premiums
In 2026, Medicare participants will pay more for their health care. Part B costs are expected to rise more than 10%. Here's what you can do.
-
I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting By
Learning good financial habits — building an emergency fund, paying down debt, saving consistently — gives you flexibility, options and a path to security.
-
Financial Fact vs Fiction: Why Inflation Is Lower, But Prices Are Not
Do you think bonds protect you from stock losses? Are you confident your assets will go to your intended heirs if all you have is a will? Think again — and read on for other myths that could be leading you astray.
-
'Buy Now, Pay Later' for Everyday Spending? This Financial Pro Thinks It's Risky
'Buy Now, Pay Later' apps can get you out of a jam when you need money quickly. But using them regularly for small purchases could create problems.
-
From Dream Apartment to Nightmare: When Your Landlord Evicts You Through No Fault of Your Own
This is what I suggested a tenant do to get out of her lease after her landlord's inexperience and lack of action made her rental situation unsafe. It's a legal situation called 'constructive eviction.'
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for Women
While most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational Wealth
Private placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.
-
Five Money Moves to Make Before Your First Child Arrives: A Financial Guide
I wish I'd known some of these when I was an expectant parent. These important steps include establishing an emergency fund, budgeting for new expenses, securing life insurance and more.
-
A Financial Planner's Guide to Planning for Retirement Health Care Expenses
Whether you're eligible for Medicare or getting coverage through the Affordable Care Act, make sure you plan for premiums, deductibles and other out-of-pocket costs.