How to Teach Your Kids About Money: Financial Literacy Tips from Robin Taub
Should I give my kids an allowance?
What’s an RESP all about?
I’ve made a lot of financial mistakes. How can I teach my kids what to do?
These are just some of the questions parents have regarding financial literacy education for their children. For many, it’s an overwhelming topic.
Robin Taub wrote her book, The Wisest Investment, for this very reason: parents need help teaching their children about money. And, they need clear, straightforward, and actionable advice.
Originally written as a post-2008 financial crisis resource under the name A Parent’s Guide to Raising Money-Smart Kids, Robin has recently updated and re-published the book to reflect our current digital, post-pandemic world.
Robin joined me on episode 55 of The Canadian Money Roadmap to discuss the principles and tips in her book. As a CERTIFIED FINANCIAL PLANNER® planner in Saskatchewan, I typically work with adults close to retirement. But through my work, I’ve seen the impact of good financial literacy, especially from a young age. Starting kids out with strong financial education and understanding can help provide the foundations for success later in life.
Check out our full interview together, or read on here to learn some key takeaways about how to teach your kids about money.
Financial Literacy Barriers for Parents
Before jumping into practical tips, let’s first look at what’s holding parents back from giving their children a strong financial education.
The original catalyst for Robin’s book was research collected by CPA Canada, which showed that post-2008 financial crisis, parents were struggling. Data suggested that while 78% of parents tried to teach their kids about money, two-thirds felt they hadn’t been particularly successful, and more than half didn’t know what information they needed to talk about.
This begs the question: Why do parents struggle to teach their children about money? Robin points to a few reasons:
Perceived lack of time: Many parents struggle to find time to devote specifically to financial education or conversations. The biggest mindset shift here is that it just takes teachable moments during your daily activities to provide financial information.
Lack of knowledge: Many parents don’t feel like they have it “all figured out” themselves, so how can they teach their kids? You don’t know what you don’t know, so parents’ financial illiteracy makes it hard to pass down knowledge.
Feelings of shame or embarrassment: Besides just not having the knowledge, many parents feel ashamed of past financial decisions. Or they may feel like they should be doing better at this stage in life.
Any of these reasons, among others, prevent parents from talking to their children about money.
But the reality is that your kids are constantly learning from you. They watch you and listen to you, picking up a lot along the way. So you’re already teaching them something! It’s better to be intentional about what you teach them, so you can set your children up for financial success.
5 Pillars of Finance and Stages of Learning
Finance is a big topic. How do you even start? Robin’s book talks about the five pillars of money:
Earn
Save
Spend
Share
Invest
These five pillars build on one another to create a well-rounded understanding of finance. Depending on the age of your children, some may be emphasized more than others at different times.
Robin recognizes four stages of development that determine how to talk to your children about money: young children (5-8), pre-teens (9-12), teenagers (13-17), and emerging adults (18+).
The pillars don’t change, but how you talk about them does. Understanding these different ages and stages means you can give relevant, age-appropriate financial education to your kids. The best way to help them retain information is to provide something that’s useful to them at the time.
Practical Tips to Teach Your Kids about Money
Okay, on to the practical. What are some realistic ways to include financial education into your children’s lives? Robin suggests three main ways:
Use your values to guide financial decision-making
It takes discipline to save, give, and invest money. Especially with children who don’t understand the value of money or haven’t worked yet, it’s hard to work towards a financial goal.
Aligning financial goals with personal values is key to this process. Robin has a values validator quiz on her website, which helps families identify what is most important to them. As your child gets into their pre-teen and teen years, they can also take it to understand their own personal values.
Some examples of aligned financial goals and values include:
You children can donate partial proceeds from a lemonade stand or other entrepreneurial activity to a local charity.
Teenagers can start saving for big-ticket items that are important for them, such as a computer or instrument.
Emerging adults can pay for part of their schooling and understand the money their parents have set aside in an RESP (Registered Education Savings Plan).
2. Look for teachable moments in your daily life
Many parents feel like they just don’t have the time to teach their children about finances. But here’s the thing—it doesn’t have to take a lot of time! It’s just about finding teachable moments that come up throughout the day. Here are some examples:
Going to the ATM and taking out cash—you can explain it’s like a piggy bank, where you have to put money in before you can take it out
Explaining what a debit or credit card is when you’re at the grocery store
Showing your children what a utility bill looks like and how to pay it
If you start paying attention, you’ll notice so many teachable moments throughout the day! Use them to start a conversation with your kids. They’re naturally curious, too, so listen to their questions and keep talking about it.
3. Get your financial house in order and lead by example
Like I said earlier, your kids are watching and listening to you. They’re already picking up on your financial habits and learning from them. So, it’s important for parents to get their financial house to lead by example.
You don’t need to be perfect. Let me say it again—you don’t need to be perfect! None of us are. You can even see this as an opportunity to learn together with your children.
But, you do need to take ownership of your financial life in order to be that good role model. This may look like a few things:
Expanding your financial understanding by reading, listening to podcasts, or taking a course.
Talking with a financial advisor or planner to develop a plan
Connect with family and friends and have honest conversations about your finances and financial goals
Teaching your children about money doesn’t have to be scary and overwhelming. But it does take some intentionality and effort.
Start by looking inward at your own values and what you want your children to learn. Focus on getting your financial house in order so you can be a good role model to them. Finally, use teachable moments throughout the day to help them learn about the five pillars of finance: earn, spend, save, share, and invest.
If you want to dive deeper into how to teach your kids about money, get yourself a copy of Robin’s book, The Wisest Investment. You can also listen to our interview on episode 55 of The Canadian Money Roadmap podcast. We went into further detail about everything here, plus chats about allowance, investing in yourself, and many real-life examples of these principles in practice.
—
Evan Neufeld is a CERTIFIED FINANCIAL PLANNER® professional in Saskatoon, Saskatchewan and offers both investing and fee-only financial planning services.
*Disclaimer: Any numbers or rates of returns are used for illustration purposes only and should not be taken as fact. Note that the information in this article is current to the time of writing but is not guaranteed as up-to-date past then.
This article and accompanying podcast do not constitute personal financial advice. Evan Neufeld is a CERTIFIED FINANCIAL PLANNER professional in Saskatoon, Saskatchewan, and provides this Canadian personal finance content for educational purposes to the public. You are welcome to contact Evan to receive personalized fee-only financial planning or investment portfolio management.