5 Ways Rich People Teach Their Kids Financial Literacy…And So Can You

How would you describe your relationship with money? Are you a savvy investor? Or does the thought of making financial decisions create a pit in your stomach and make your palms sweaty?

Don’t feel bad if you are more like the latter—less than half (47%) of Americans feel confident making good financial decisions. For many of us, our relationship with money is complicated at best. Money can stir emotions within us that we didn’t know we had, and worries about money is consistently ranked the number one source of anxiety for Americans.

How would you describe your relationship with money? Are you a savvy investor? Or does the thought of making financial decisions create a pit in your stomach and make your palms sweaty?

Don’t feel bad if you are more like the latter—less than half (47%) of Americans feel confident making good financial decisions. For many of us, our relationship with money is complicated at best. Money can stir emotions within us that we didn’t know we had, and worries about money is consistently ranked the number one source of anxiety for Americans.

How would you describe your relationship with money? Are you a savvy investor? Or does the thought of making financial decisions create a pit in your stomach and make your palms sweaty?

Don’t feel bad if you are more like the latter—less than half (47%) of Americans feel confident making good financial decisions. For many of us, our relationship with money is complicated at best. Money can stir emotions within us that we didn’t know we had, and worries about money is consistently ranked the number one source of anxiety for Americans.

Perhaps you have experienced money anxiety or financial-related trauma, which can have symptoms akin to those of post-traumatic stress disorder (PTSD). You might be among the 83% of Americans carrying debt, and you’re unsure how to overcome it.

When it comes to teaching your kids financial literacy, you might be looking around the room and wondering, “Who? Me?! Definitely not me. I don’t know anything about financial literacy.”

But don’t worry. You know a lot more than you think. So, give yourself a break and take a deep breath. Read on about the five ways rich people teach their kids about financial literacy, and then use them with your kids.

#1 – Expose your kids to financial concepts when they are young. This can begin as early as age five or six. Seth Wunder, Chief Investment Officer at Acorns, says “This is the age children are starting to understand math at school and are able to comprehend the consequences of ‘if it’s gone, it’s gone’ and setting aside money for things they really want.” One of the easiest, fun, and relatively affordable ways to do this is through a lemonade stand.

#2 – Encourage saving and investment. A lemonade stand can help here, too. If your child had a little success with their first stand, encourage them to set a little of their profits aside for savings and then help them reinvest some of the remaining funds into additional product offerings such as cookies or even bracelets they make themselves.

#3 – Teach them to manage a small budget. This can and should be simple. If your kids have a cell phone, make sure they contribute something to the bill, even if it is a small portion. Many families set up a small economy at home that pays an allowance in exchange for chores. Their “bills” can increase as they get older and closer to living independently. This practice will teach financial literacy and better prepare them for real life.

If you want to take it to the next level, consider sharing more details about the household budget. Because most money today is invisible (credit cards, automatic bank transfers, checks), some parents have even cashed their entire two-week paycheck and placed it in physical piles representing rent or mortgage, groceries, extracurriculars, and so forth. This helps their kids visually understand the largest household expenses and what is left over for saving, investing, or just having fun.

#4 – Talk about money. Relax, you don’t have to tell them all your secrets or past mistakes with money! Try to have transparent, age-appropriate conversations with your kids, preferably not in the middle of a debate about a purchase. Talking about money helps children develop a healthy relationship with money. If you go to an amusement park, consider bringing cash, show them how much you can spend for the day, and have them participate in planning your activities. Bonus side effect—many families find it easier to get their kids out of the park at the end of the day because kids understand the money has run out and aren’t caught off guard.

#5 – Consider philanthropy and activities related to social responsibility. This teaches empathy and connects kids to their community. Donations of any amount, large or small, are welcomed by almost every organization or cause. This can help kids understand how organizations are funded and even motivate them to earn more to support those they are passionate about.

These five things are low-cost, simple ways to teach your kids financial literacy. The amount of money in these activities and conversations isn’t important; what matters is that you start talking about money with your kids. Remember, it’s okay not to have all the answers; just start learning alongside them. Even if you didn’t grow up learning about finances, it’s not too late. You got this!