10 Tips for Instilling Good Financial Habits in Your Children (or Grandchildren) 

Teaching children good money habits early on can significantly influence their financial success in adulthood and positively impact future generations.  

But how can this be achieved, especially when you might face challenges around discussing money, like social stigma and privacy concerns, or a lack of your own role models and financial education? You’re not alone. Most American adults have poor money management skills — less than 50% are financially literate, meaning they have basic budgeting and saving skills but don’t understand investing, insuring, financial risk, and retirement.¹ 

Parents, Children, and Financial Literacy It’s very important to parents that their kids are financially independent in adulthood, according to nearly 90% of surveyed parents.2 Only about 24% of 15-year-olds said they discuss finance and economics news frequently with their parents.3  Nearly twice as many (53%) said they talk to their parents about money when they want to buy something. Around 25% of Generation Z (ages 18-27) and millennials (ages 28-43) members claim their parents haven’t taught them how to build financial wealth.4

Following are 10 suggestions that can help you have a positive affect on your children’s financial literacy and lead them towards financial security and success in adulthood.  

10 tips for instilling good financial habits 

1. Start early 

Begin giving children lessons about money as soon as they can understand basic concepts. A simple activity like saving coins in a piggy bank or openings a savings account can be a good start. There are also plenty of books, podcasts, websites, video games, and apps available for learning financial literacy at all ages. 

It’s almost never too early to verbally instill fundamental actions and repeat them often, such as: 

• Live within your means. 

• Do not get into credit card debt. 

• Keep an emergency fund. 

2. Have open conversations 

Normalize financial conversations and make them a regular part of family life to help kids feel comfortable talking about money. They should be age-appropriate discussions and respectful of privacy. For instance, instead of focusing on income amounts or debt balances, talk about the value of spending and saving. When it’s the right time, explain why some financial information is private and why it’s important to be cautious about sharing it with others.  

3. Lead by example 

Demonstrate healthy financial behavior. Involve kids in grocery shopping or other activities where wise spending choices should be made. Allow them to see you working on a budget, monitoring your accounts, or comparing prices when shopping. Explain why you’re not buying certain things or are saving for large purchases, rather than charging them to a credit card — maybe you have your own piggybank or money jar on your desk.  

4. Set goals 

Teach children to set financial goals, whether it’s saving for a toy or a bigger expense like a school trip. This helps them learn the importance of planning and the satisfaction of achieving objectives. Discuss pursuing life and career goals that can give them enjoyment, as well as a comfortable living. When they’re old enough, talk to them about setting up a Roth IRA or contributing to a company 401(k) when they can. 

5. Encourage saving and giving 

Have kids divide their allowance or earned money into saving, spending, and giving buckets. This helps them understand the practical steps of managing money. Show how their income can provide more than toys, snacks, and games for themselves — they can still enjoy their “wealth” but get fulfillment by sharing it. Depending on their age, you could match their donations to a nonprofit of their choice or accept charitable contributions instead of birthday gifts.  

6. Resist instant gratification 

It’s easy to tell your kids to save money, but without life experiences or practical methods to do so, it may not happen as early as we like. Teaching the importance of saving is even more difficult these days since you can order anything with the click of a button. In addition, many transactions are done digitally so money doesn’t feel tangible. Consider a debit card for kids and teens, which helps them learn to manage and save money while you still have control. 

7. Define wants and needs 

When children ask why they can’t have something, try to frame conversations around purchasing items based on “needs” first and “wants” second. By evaluating and understanding the differences, they can feel secure knowing their needs can be met and comfortable when not all their wants are fulfilled. 

8. Encourage investing 

The lesson is that zero risk will likely come with zero rewards. Let kids know it’s okay to consider investing in things they believe in and are passionate about. Start by helping your kids invest in, say, three individual stocks. Stock ownership can help them learn the fundamentals of investing, the impacts of market volatility, and the nuances of different investment products. Encourage them to monitor the markets and their stocks regularly. Also, if they have an IRA, show them often how they’re getting compounding interest on contributions and funds. 

9. Introduce entrepreneurship 

If children are struggling to understand why they can’t get or buy whatever they want, the classic lesson for earning money is the lemonade stand. Maybe you give them a loan to get started, help them with ideas for marketing and pricing, and teach them how to give buyers change. They can learn about supply and demand, cost control, customer service, and profit margins — but most of all, they should have fun.  

10. Continue building financial knowledge 

Throughout their lives, even in adulthood, keep talking to them about money: saving for an emergency cash reserve fund, budgeting for home improvements, contributing to their IRA and employer retirement plans. Discuss the differences between good debt and bad debt. Don’t forget to explain the importance of taxes and avoiding lifestyle creep.  

Get guidance 

Instructing your children or grandchildren about money isn’t easy — it takes time, practice, and patience. But, by talking to them now, you could have a powerful impact on your child’s financial stability and future, as well as on your family’s future generations. If you’re not comfortable doing it on your own, we can help. 

At Mercer Advisors, we offer a family office for your family. For nearly 40 years, we’ve been guiding families in wealth management — and many of our advisors are parents or grandparents. If you’re interested in having us share our experience and advice with you, let’s talk. 

1. “The 2024 TIAA Institute-GFLEC Personal Finance Index,” TIAA Institute. 

2. “Parenting in America Today,” Pew Research Center, Jan. 24, 2023. 

3. “Money Matters: Exploring Young Adults’ Financial Literacy and Financial Discussions With Their Parents,” National Center for Education Statistics, Jan. 18, 2023. 

4. “How Financial Literacy for Young Adults Has Evolved,” BankRate, Apr. 11, 2024.