5 Tips For Teaching Your Kids Financial Literacy

~ 11 Minute Read


I have a confession to make here to all the readers at The Micropreneur.  I was a terrible student.  Like really bad.  Actually, often I wouldn’t realize I had a test in a class until the teacher was passing out the paper.  That bad. Can you say “D-“.

Whether I was supposed to be learning about MacBeth or the War of 1812 I simply wasn’t all that interested in what was being taught.  The truth is that I have a thirst for learning that continues to this day.  But I only have motivation to learn things that I have a natural interest in.  If you plan on teaching me about math I’ll never use or historic dates from deep in the past I’m going to check out faster than Stanley from The Office.



What was terribly frustrating to me as a student was that it seemed that schools only wanted to teach me about things that were not interesting to me.  I’ve had a curiosity about business and finance since high school, but there weren’t many opportunities to learn about these topics in rural Ohio.

Even as a business major I left college feeling like the fundamental questions of business ownership had gone unanswered.  How do I start a business?  How do you write a business plan, and do you need one?  Why is investing crucial for your future well-being? What is with all the weird stock market lingo like capital, market cap, shorting stock, derivatives, etc.?

I’ve realized that I’m not alone when it comes to this lack of exposure to financial literacy. One of my many goals as a father is to teach my daughter the fundamentals of money, investing, and business so that she can have a head start in these domains.

Here are five tips for those of you who plan to make teaching your child(ren) financial literacy:


1. Start Early

My wife is a high school Spanish teacher.  Once of the things about her job that we’ve discussed at length is how second languages should be taught much earlier in life, when a child’s brain is primed to absorb new information.  By the time Jessica gets freshman in for Spanish 1 it is already too late to be teaching a second language.

Delaying Gratification and The Marshmallow Test

The same is true for financial literacy. Simply put, teaching your kids about the importance of managing money and delaying gratification at an early age will help ingrain these principles later on in life.  In regard to the latter, there is a famous test in psychology called the “Marshmallow Test“.  This test was designed to see if a child’s ability to delay gratification correlated with better financial and achievement outcomes later in life.  Spoiler alert: it did, big time.

Delaying gratification is one of the most important characteristics of simple financial literacy.  Knowing that I don’t need a new car with 72 month loan, or the large (but cheaply built) mcmansion is key to saving and drawing interest from those saving.  I talk about this extensively in my article about the two functions of money. But if delaying gratification is an innate trait based on genetics and personality, it would seem that this skill would not be teachable.

Well, turns out that the results of the Marshmallow Test may be less to do with personality traits than socioeconomic status.  Kids who are raised in more well off homes are observing and being taught proper financial literacy from their parents, while kids from poorer homes are often observing a world where you live day-to-day while trying to acquire max material objects.

This shows that delaying gratification, and thus some of the common pillars of financial literacy are teachable skills.

Later Childhood and Adolescence

During this period it is important to give your child opportunities to manage money and learn ways to earn more.  Guide them through the choices they have with their money explaining the pros and cons of each choice.  Go to the bank and allow them to handle a bank deposit.  Show them how to invest money using trading platforms like E-Trade and robo-advisors like Betterment.  Everything should be about letting your child experience what it is like to handle and save money.  Give them ownership while providing guidance.

Encourage micro-business opportunities, especially in the summer, such as mowing grass, babysitting, and others.  If your teenager has a part-time remind them to gather information about their work place.  How do they make their operations efficient?  What distributors do they use for supplies or products?  What do they do to bring in new customers?  Having a job is a great way to learn how businessmen and women think, you’ve just got to open your eyes.


2. Be A Mentor (Or Find One)

Children are masters of modeling behavior.  If they see you do something they are more likely to do it themselves.  If you want your son or daughter to have financial literacy it is important that you take an honest look at your habits to see if you are practicing financial literacy yourself.  By setting a good example your child will see what good money management looks like.

For those who want to take this to the next level find a financial or business mentor for your kid.  As they get older kids are more likely to listen to their peers or others rather than their parents (because you just aren’t cool anymore, dad).  A lot of successful people like to pay it forward and helping your kid find a mentor they can learn the ins and outs of finance and business management.


3. Enroll In A Camp


A great way to learn about business, entrepreneurship, and financial literacy is to go to a camp about these topics.

Thankfully, the need for supplemental education on these topics often lacking in traditional school settings is now recognized, and as a result new camps and programs have been created to fill this void.  These programs aspire to teach children the benefits of financial independence along with skills that will help them flourish with entrepreneurial spirit.

Some of the more well known programs include Moolah U.  Not only does Moolah U have onsite camps and programs, but they also have online classes (some of which are free) that teach skills related to financial literacy and business.

Another camp that teaches entrepreneurial skills is CampBizSmart.  These camps are designed for kids 11-19 and take place mostly in California with some others scattered throughout the USA.  What I like about this camp is that it walks participants through the process of corporate roles, problem-solving, and pitching to investors.


4. Allow Them To Solve Their Own Problems

There is a crisis going on in American parenting, it seems harmless but in fact causes your child to rely on you and delay inevitable independence.  It also hinders the chance for your kids will develop financial literacy as a result.

The crisis I’m referring to is some parents’ inability to allow their children to solve their own problems.  For those of us who see a future where our child is a functioning adult and we as parents get to enjoy the freedom we had as much younger versions of ourselves, this is an credibly important aspect of parenting in a broad sense. If you’d prefer your child live in your basement or act like Jean-Raphio Saperstein and his wonderfully dysfunctional sister Mona-Lisa from Parks and Rec then be my guest and keep solving the shit out of your kid’s problems.



So, what does this have to do with financial literacy, I hear you angrily tell me from your computer, well frustrated reader I’m about to give you the goods.

Financial literacy and business ownership require the ability to think on your feet, be flexible, and solve problems!  Problem-solving is a prerequisite to full-on financial literacy.  Allowing your child to solve problems that occur will offer chances to practice all of these skills, and by practicing them they’ll get better at finding effective and efficient ways to get out of seemingly tough situations.  All things the financially literate do.


5. Encourage Creativity


One of the main reasons I got into school psychology was the disconnect between my interest in learning and being creative compared to my performance at school.  While I’m happy I’ve left school psychology behind, I vividly remember many kids being sent to me with teachers telling me the child had a learning disability, ADHD, behavior disorder, etc.  The truth is that several of these kids weren’t disabled but were not fit to sit in a classroom six hours a day while being forced to remain quiet.

Our school system and society at large works to eliminate creativity.  Schools follow a strict schedule.  Standardized testing means that all children are supposed to know the same “stuff”.  Common sense will tell you that if everyone knows the same shit then it becomes near impossible to stand out.  Good luck, graduates!

To top it off all this testing is creating an anxiety crisis in our children.  Teachers feeling the pressure of evaluations relay that pressure on to their students, who then feel the same pressures.  My recommendation is as parents to put little stake in your child’s performance on these tests as I find them essentially meaningless.  If Mrs. Jones wants to freak out over your child’s test score, then let her, but don’t allow her to pass on that stress on to my kiddo.  That’s her problem, not little Johnny’s.

Make sure to give your child downtime and allow them to find ways to entertain themselves that doesn’t include video games or television.  I know this is going to sound radical, but if there is a teacher giving ridiculous amounts of homework and taking up your child’s evenings with worksheets then consider allowing your child to not complete the homework and take a lesser grade.  Here’s a little secret, there is no research to verify the effectiveness of homework before the 9th grade.  Let your child be a child and explore this wonderful world we occupy.  That means time outdoors, playing with peers, family time, and getting good quality sleep.  They will be more well-rounded and creative as a result.

What do you think?  Do you agree with these suggestions?  Do you have other tips for teaching your kids financial literacy?

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