Teach Your Kids Lifelong Lessons About Personal Financial Management

Blog Posts

No doubt, your children will absorb a lot of information about many different things while they’re in school. But one thing they probably won’t learn much about in school is personal finance.

The ironic thing is that personal financial management is one of the most practical, hands-on skills young people can learn today. Nothing against Algebra, Chemistry and Physics, but if your kid isn’t going into a career that demands strong math and science skills, he or she might never use this knowledge again after graduating high school.

It’s Up to You

On the other hand, everyone needs to possess some basic personal financial management knowledge and skills. If your kids aren’t learning this at school, then it’s up to you to teach them sound money management principles at home.

So when should you begin this education? Many experts say it’s almost never too early to start. At around age 3, most children can grasp the concepts of earning, spending, saving and even investing money. Therefore, you could start building a foundation of personal financial management education by giving your children an allowance starting around this age.

Some personal finance experts and parents believe that allowance should be tied directly to work or chores that are performed around the house. This can give children a good understanding of how money is earned in exchange for doing work — something they’ll obviously need to grasp as they grow older.

Others believe it’s simply important that children receive some amount of money that’s theirs to spend, save or invest pretty much however they please. This gives them a good understanding of how money is finite — or in other words, money spent today on a video game can’t be spent tomorrow on a DVD or saved for the future purchase of a new PlayStation.

Either way, the most important thing is that you pay out your kids’ allowance on a consistent basis. For example, if you agree to a $5 per week allowance, pay this on the same day every week. If you’re not consist, your kids will believe that they won’t necessarily receive financial rewards they’ve been promised — a damaging message to receive early in life.

How much should you give your kids for allowance? This question will be different for every situation, depending on your family’s income, the cost of living where you live, your child’s age, and other factors. Talk to your spouse and kids and come up with a number that everyone is comfortable with.

Loosen the Reins

One of the hardest things about giving kids an allowance is resisting the temptation to tell them what to do (and not to do) with the money. After all, you have a lot more financial wisdom than your kids do and can probably prevent them from making financial mistakes.

But resist you must. Otherwise, your kids won’t learn the valuable personal financial management lessons that are as much a part of giving an allowance as the actual money itself. These lessons can only be learned if your kids are allowed to make most of their spending, saving and investing decisions themselves — including making occasional mistakes.

You could, however, require that your children set aside a percentage of their allowance to save or invest and give away. In fact, this is the perfect time to teach kids about the importance of saving and giving: Instilling these disciplines early can lead to a lifetime of good financial habits.

As your kids get older — for example, when they’re teenagers — you can gradually increase their allowance and their personal financial responsibility. If they start working a part-time job and earning their own money, you could scale back their allowance or eliminate it completely.

It’s Not Too Late, Either

Finally, if your kids are older now and you haven’t started teaching these financial lessons yet, don’t worry — it’s never too late to start, either.

The most important thing is that you instill some basic personal financial management knowledge and skills in your children while they’re still under your roof. When done right, this kind of education may serve your children well for the rest of their lives.


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

How can I get started?

contact us