How Do Parents Best Teach their Children Financial Skills? By Example, say Experts

In a recent poll, the National Financial Educators Council (NFEC) asked adults around the U.S. who they believed should bear primary responsibility for teaching children about money, and 65% responded that this task should fall to parents. The NFEC took the question a step further by asking financial experts for their opinion. “Did you realize that most adults and their hang-ups over money are formed when they were between 5-12 years old?” asks Rocky Lalvani, MBA and Financial Coach at Richer Soul. “Look around – are people living a rich and abundant life? Most parents can’t handle their own finances; how can they handle teaching their kids?”

Lalvani goes on to say that the best way parents can start teaching money management skills to children is by example. “Too often parents talk about money; however their actions are far louder than words. That is how children learn – by watching what you do. If you don’t save, overspend or act in a scarcity mindset that is what they see.”

Ross Riskin, CPA/PFS and CCPS at Riskin Advisory, agrees with Lalvani. “I believe the best way parents can teach their children about money is to practice smart and healthy financial habits themselves. This is one area where parents cannot fall back into the mantra of, ‘do as I say and not as I do.’ Children often imitate and reflect the behaviors their parents exhibit as these adults are arguably the most present and important influencers in their lives.” Riskin suggests that parents should remain open to talking with their children about money and the importance of saving, going on to say, “They also need to be cognizant of the fact that the eyes and ears of children can see and hear what their parents do even after the lesson is over.”

Parental modeling had a profound effect on Ilene Davis, CFPâ and MBA at Financial Independence in Cocoa, Florida. “I’m confident my brother, sister and I would not be where we are today financially if it weren’t for what we learned early on from our parents,” says Davis. “As for quotes I got from my parents, I think the best one…was when I was 19, my dad was VP at one of the largest companies in the area, and I thought he should buy me a car like all his peers were buying their kids. He just looked at me and said just because I earn the money doesn’t mean you get to spend it. At the time, I called him all kinds of names, told him he didn’t love me, but wish I could each day thank him for his WISDOM (he died when I was 26).”

What parents teach their children sets the precedent for their relationship with money for the rest of their lives, is the opinion of Whitney Lee, Associate Private CFOâ at oXYGen Financial in Alpharetta, Georgia. “Lead by example!” Lee exclaims. “Your kids are constantly watching and learning from you, so set the best example you can! If you are only paying with credit cards, and disregarding the budget or responsible spending, they will pay attention to that and learn those ways as well! They’ll also pick up on arguments you and your spouse may have about money, and that sets a negative impression for the future.”

“I don’t think we can generalize the term  money when it comes to education and determining whether a parent is qualified

[to teach] or not,” claims Mindy Crary, MBA, CFP® of Creative Money in Shoreline, Washington.  Instead, Crary suggests, “We need to break down the different aspects of money so each individual can make their own determination regarding if they have the appropriate skill level to guide their children’s education.” While parents may have knowledge and skills that complement each other, “That doesn’t mean any child learning about money should blindly follow the example their parents set, no matter how good,” cautions Crary. “Part of education is questioning, and that can’t happen unless children have something to compare and contrast their personal experience.”

Natasha M. Campbell is Founder and CEO of Lifestyle Success Unlimited. “A child does not enter the world with any form of attitude about money,” says Campbell. “Everything a child has learned related to money has been passed down from the adult figure in their life. Money is no different than any other important life skill, so why do we separate it as if it’s a taboo topic?” According to Campbell, any parent who is willing to teach children how to have a healthy relationship with money is qualified to do so. What is a healthy relationship? “[It] involves parents demonstrating – modeling, verbal programming (speaking positive), and how to save, spend, and share money. Modeling is important to show discipline, responsibility, and maturity,” she explains.

Children learn most values by observing someone they respect and admire, says Rob Drury, Executive Director of the Association of Christian Financial Advisors in Texas. “A child learns how to treat people by seeing how people are treated by their parents. Some parents are more effective than others in passing down traits of financial responsibility, but irresponsible financial behavior is invariably hereditary. Therefore, teaching children the proper handling of money must be very intentional on the part of parents.” Drury continues, “If parents do not have a good track record handling money, it is imperative that they correct their behavior for their own, then their children’s, good…such correction is usually not an academic venture. It is best for the parents to participate in interactive personal finance courses or programs…or obtain a comprehensive financial planner or advisor.”

Drury also thinks that for children to learn how to manage money, they first need to have some money to manage. Whether it’s money for completing chores or an allowance, kids should be given sufficient funds to cover discretionary spending and then be allowed to make choices with the money. They should be applauded for responsible choices and allowed to suffer the consequences of bad ones. If they run out of money before they get something they want, the financial literacy lesson they learn will probably be far more valuable than the item they wished to purchase.


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