Want Financially Savvy Kids? Give Them These 3 Gifts

Memoirs and platitudes are full of reminders that adversity creates strong people. As a parent, that correlation is terrifying but hard to deny. Is it possible to provide financial security to a child without raising a “trust fund baby?”

parents teaching child at kitchen table

Don’t Spoil Kids; Give Them More!

I’ve gleaned wisdom from parents of successful kids - both experts and laypeople, and common motifs stood out: The parents of these competent, grounded kids surprisingly give their kids a lot, while somehow keeping them from becoming spoiled or entitled.

  1. They give lots of responsibilities to their kids.

  2. They give the means by which the kids could successfully fulfill those responsibilities - in early years, that means giving straight-up cash with very clear guidance on how to use it.

  3. They give their kids opportunities to struggle and fail.

The idea is to raise financially competent kids in a manner similar to how we help them learn to walk and eventually run. We would never carry them on our backs until they move out! Instead, we create structures for them to be challenged but still (mostly) succeed. We stoop over, supporting unsteady toddlers. We let go and challenge them to take a few independent steps and provide soft spaces for their inevitable falls. As they age, we seek out opportunities for physical challenge - on a hike or with a track team - and we celebrate their accomplishments.

Real Life Examples: Hard Challenges and Productive Failures

Preschool-age: Learning to Budget

At age 5, Max receives an allowance every week of three $1 bills. Receiving bills in a multiple of three is helpful because he has three clear jars labeled “give,” “save,” and “spend” (a simple budgeting concept from The Opposite of Spoiled: Raising Kids who are Grounded, Generous, and Smart about Money by Ron Lieber). Max has all the freedom to choose what he donates to, goals to save toward, or what he spends his money on, but those three categories are non-negotiable. When relatives give him cash for a holiday or birthday, his parents change the cash into single dollar bills, so that he can divide it up.

When Max’s family received a fundraising letter from someone working on water filtration devices for rural, tropical communities, Max wanted to give toward this cause, but his “give” jar was empty. He learned what a “pledge” was and committed to giving $12 on a later date. His parents continued paying his weekly allowance and supplied a separate, labeled jar for this distinct goal, and he fulfilled his pledge. Everyone in the family, down to 5-year-old Max, was excited to see pictures and hear stories about this project.

School-age: A Lizard’s Life Depends on It

Jacquelyn chooses to give her kids a weekly allowance of $1 per year of age, unattached to chores, hygiene, or grades. She and her partner want their kids to practice those life habits as part of being a conscientious housemate and person; plus, those busy parents dislike conducting weekly evaluations of kids’ chores.

With a great allowance comes great responsibility, the largest of which is the kids’ pet bearded dragon. The kids saved up for the terrarium, heat lamp, and the lizard himself, and for as long as he lives, they are locked in to purchasing crickets and mealworms each week. With the weekly food “bill,” the kids are practicing how to meet regular financial obligations, knowing that their lizard will go hungry if they blow all their cash. Their parents have made it clear that they would rather let the lizard die than bail them out if the kids neglect their duties to him.

School-age: A Costly Lesson in Debt

Before Citrine, I worked at an in-person office that had a fridge full of soft drinks. A 7-year-old named JT asked me (among many others) if he could have the cans from my office before the building custodian cleared them out. As he sifted through many 13-gallon bags in his driveway, he explained that he saw a skateboard he could not yet afford. Too impatient to save up for the skateboard, he asked to borrow the money from his parents. They agreed to loan the money with weekly, compounding interest on any outstanding balance, and they showed him how the math worked.

JT saw his debt grow, despite paying some back each week. His parents helped him make an aggressive payment plan, suggesting ways he could earn more money. Though they helped by driving him to the recycling center, JT was solely responsible to collect, sort, and redeem the cans and bottles. It took months to pay back the cost of the skateboard plus interest - more time than it would have taken him to simply save for it.

The lesson was painful but less so at age 7 than 27. No credit card company will help a broke debtor by giving rides to the recycling center!

School-age: Sinking Funds

8-year-old Gus is responsible for buying birthday presents any time he is invited to a party. Some months have lots of birthdays, and some months have none. After the stress of a birthday-dense season, Gus started a new budget category in his accordion-style organizer for his cash, labeling it “gifts.” He contributes to it each week, regardless of whether someone has a birthday coming up. This way, he is always prepared to party.

Tweens: Starting to Pay for Their Own Basics

Like many tween girls, Grace wanted to dress well and look good. Her parents were clear about what clothes they would buy her each year: a warm outfit in the fall and a cool outfit in the spring. Any clothes outside of that, she would have to buy on her own. Her parents gave her more than enough money to clothe herself, but the onus was on her to make it last. They watched her blow all her money in the summer and have to wear flip-flops through the winter (uncomfortable but not dangerous, living in southern California). Later, when Grace got a job as a teenager, she understood the importance of thinking ahead with each paycheck.

A Foundational Habit: Normalize Talking about Money

Commonly, when a young person gets their first job or credit card, their primary sources of advice are social media, equally clueless friends, or commissions-driven salespeople. To contrast, if a young person grows up in a home where discussing money is normal, then they possess a resource more valuable than money - trustworthy adults able to serve as competent and humble financial guides.

Adults at all points of the socioeconomic spectrum may find money an awkward topic to broach. If money is scarce, loving adults want to spare kids that stress. If a family is financially secure, similarly loving adults desire to protect kids from a perceived license to be lazy.

Simple ways you can start this foundational habit:

  • Reason out loud when you decide to buy or forego something.
    Eg: “We could order dessert, but it’s really expensive and not that tasty here. I’d rather have some ice cream from the freezer when we get home, and spend that money on something more enjoyable another day.”

  • Include the kids on some family financial decisions.
    Eg: “I just got an unexpected bonus! I saved $1,000 to be ready for an emergency, like when the dishwasher broke last year. Let’s brainstorm what we could do with the remaining $2,000.”

  • Let them see your bank accounts, budgeting app, investment accounts, pay stub, etc. Note what the different numbers mean to them.
    Eg: “See how taxes are taken out of my salary? This is how we chip in for public goods, like the library around the corner, your teacher’s salary, and the paved roads.”
    Eg. “This is how much money I put into the account, and this is how much it’s grown. By the time our car dies, we’ll have enough here to buy a new one.”

For more conversational prompts, check out the Consumer Financial Protection Bureau’s guide for family “money talks.”

Adults Need Help, too

If the challenge of shaping the next generation of financially competent adults daunts you, take heart. Everyone, at every age, is learning how to strengthen financial muscles, and we need to be transparent with kids as we struggle and learn.

As a Citrine client, you have another valuable resource: your advisory team! We work for the success and thriving of your whole family. If you’d like help setting up the next generation for success, get in touch with us to discuss practical steps.

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About The Author
Samantha Mockford, CFP®, AFC® is an Associate Wealth Advisor at Citrine Capital, a San Francisco-based wealth management and tax planning firm serving tech professionals, founders, and business owners. With a background in economics and over a decade of experience mentoring college students, Sam brings a thoughtful, values-based approach to financial planning.

She holds both the CERTIFIED FINANCIAL PLANNER® and ACCREDITED FINANCIAL COUNSELOR® designations and is known for helping clients build confidence through practical, compassionate guidance.

Samantha Mockford, CFP®Comment