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Teaching Our Kids About Money

Teaching Our Kids About Money

| March 12, 2018

In this week’s article we discuss the importance of financial literacy and our role, as parents and leaders in our communities, in serving as financial mentors and educators in our kids’ lives.  Why is it that 1 in 5 children don’t meet baseline levels of financial literacy, and only 10%¹ are able to analyze complex financial products and problems? Are we unintentionally missing opportunities to prepare them?  It’s a concern that transcends socioeconomic status.

“Teaching Our Kids About Money”

As parents we want to prepare our kids for “Success” in life (however we, and they, may personally define it), and preparing them typically includes caring for and loving them as best we can as they grow and transition to and through adulthood.  We provide them with educational opportunities and other developmental experiences both within and outside of the school system.  Why then, do statistics show that 1 in 5 children don’t meet baseline levels for financial literacy, and only 10% are able to analyze complex financial products and problems?  Is it because our definitions of success no longer include “financial wellness”?  As parents and leaders in our communities are we unintentionally raising children who are too often financially naïve, unprepared, and entitled, because we underestimate and sometimes avoid our role as financial educators in our kids’ lives?

Children lacking in financial preparedness is a concern that transcends socioeconomic status. Surprisingly, “70% of wealthy families lose their wealth by the second generation, and a stunning 90% by the third.” Additionally, “78% feel the next generation is not financially responsible enough to handle inheritance.”  This is especially alarming when we consider the $30 Trillion in wealth Boomers will transfer to their Gen X and Millennial children over the next several decades.²

A 2017 Parents, Kids and Money Survey by T. Rowe Price found that parents who discuss financial topics with their kids at least once per week, are more likely to have kids who say they are smart about money.¹ Parents who have 3 or more types of savings are more likely to discuss money with their kids, less likely to have kids who spend money as soon as they get it, and less likely to have kids who lie about their spending.  Parents who have more than $5,000 in credit card debt are: more likely to be reluctant to discuss money with their kids, more likely to have kids who spend money as soon as they get it, are more likely to have kids who expect their parents to buy them whatever they want, and are more likely to have declared bankruptcy.  Interestingly, kids who are aware their parents have declared bankruptcy are more likely to say they are smart about money than those who are unaware (68% vs. 30%).  Yes, kids learn from observing the money management habits of their parents, but what is most telling here, is the suggested correlation between the frequency and transparency of parent/child financial discussions, and the financial confidence of the child.

If the take-away here is that more frequent and open financial discussions are better than less, why is it that 61% of parents say they only talk to their kids about money when kids ask about it, and why is it that 69% of parents say they have reluctance to discussing financial matters with their kids?  The survey shows that parents are more comfortable talking to their kids about “terrorism” and “politics” than they are talking about “family finances” (“death” is only 1 percentage point below “family finances”).  Surprisingly, Millennials are more uncomfortable having financial discussions with their kids than Gen Xers and Boomers, so the problem is getting worse, not better.  By not talking more openly and frequently with our children (whether they are adults, or minors) about money and our own personal financial experiences (whether good or bad), we may think we’re protecting them, or helping them in some way, but we are actually impeding their potential for financial preparedness and proficiency.

In his article about Family Finances, Kids and Money, Chris Taylor says it well, “You may think you are encouraging hard work by not discussing wealth with your kids, but that really just fosters ignorance.”      

We intuitively understand that in order for our kids to achieve a level of proficiency in anything, they have to “practice”.  It then stands to reason that we should provide our kids the chance to learn about, talk about, and practice managing money as early, and as frequently as possible.  76% of parents say they would enroll their kids in a course about money and finances (students required to take personal finance courses have better average credit scores and lower debt delinquency rates as young adults), yet our schools don’t typically provide this opportunity, or if they do, it’s not provided with enough consistency throughout their lives. 3 68% of parents say they would let their kids manage their own accounts, and 56% say they would let their kids make bad financial decisions so they can learn from their mistakes, yet only 44% of parents allow their kids to decide what to save their own money for and what to spend their own money on, and only 24% of parents allow their kids to manage their own accounts.  We are missing the opportunity to allow our kids the training and practical experiences they need to develop financial skills early in life.  We need to expose them to complex financial products and problems, let them make mistakes, learn about: trade-offs, “needs” vs. “wants”, how to compare value and price, and how to save for later/learn the value of ”delayed gratification”.  In doing this, as parents and leaders in our families and communities, we should look for “teaching moments” through frequent and consistent dialogue about their experiences and our own.

Remember, as your trusted advisors, we are here to help facilitate these discussions, document family values, experiences, and best practices for money management, and provide on-going advice and accountability in helping you and your loved ones successfully grow, protect, and transfer wealth.



  1. “How to teach your kids about money”, CNBC Accessed March 5, 2018
  2. “70% of Rich Families Lose Their Wealth by the Second Generation” Time Accessed March 5, 2018
  3. “US Schools Get Failing Grade for Financial Literacy Education”, CNBC Accessed March 5, 2018

Roberto J. Duran CFP®, ChFC®, CRPC® and Ross Atefi, AAMS, CRPC, CCPS are registered representatives and investment advisor representatives of Lincoln Financial Advisors Corp., a broker-dealer (member SIPC) and registered investment advisor, 18400 Von Karman Ave., Ste 550, Irvine CA 92612 offering insurance through Lincoln affiliates and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal circumstances. The content of this material was provided to you by Lincoln Financial Advisors Corp. for its representatives and their clients. Insurance offered through Lincoln Marketing and Insurance Agency, LLC and Lincoln Associates Insurance Agency, Inc. and other fine companies.

Copyright 2018 Odyssey Wealth Design. Odyssey Wealth Design provides financial planning and wealth management to clients in Orange County, Irvine, Newport Beach, and around the country.