Raising Financially Responsible Adults:
5 Money Lessons to Teach Your Children

Parents are the first and most influential teachers that any child has. The foundational lessons parents teach form the basis for the life skills those children will use to navigate the world as adults. This is especially true for attitudes about money.

Financial literacy is not often a focus in formal education, which means the responsibility falls to parents to ensure their children grow up to be financially responsible. We forget that they are always watching, and that many of the things we do every day send a powerful message. This page outlines five key lessons you can teach your kids to guide them toward future financial security.

Five Money Lessons to Teach Your Children

1. Make Your Money Work for You

   One of the big lessons from Robert T. Kiyosaki’s classic book Rich Dad Poor Dad involves a wealthy person’s understanding of the relationship between work and money. The common misconception is that to be well off, you must get a well-paying job. While that is a fine model up to a point, you can only trade so many of your working hours for money. True wealth is a matter of taking the money you have and making sure it constantly earns you more through smart investments.

   This is a hard lesson for adults to learn, let alone pass on to their children. But understanding this mindset opens up opportunities. When income from work is no longer your sole source of revenue, you are free to pursue work that you want to do on your own terms. By teaching this concept, you can build a foundation for growing generational wealth.

   A key part of this lesson is introducing the concept of compound interest. You can explain it simply: 'It's like your money is having babies. The money you save earns a little extra, and then that extra money starts earning its own extra money.' This helps them understand that saving isn't just about putting money aside, but about making it grow over time.

   See our pages on Understanding Interest and Savings and Loans for more.

2. Spend Less Than You Earn

   A cornerstone of financial security is teaching yourself to spend less than you earn. Children must learn early on that spending money as soon as they get it can lead to problems later. Teach them instead to save.

   Saving is not just about squirrelling money away. Teach your kids that when they are saving, they should have medium and long-term goals for that money. Getting into the habit of not spending immediately is a hard lesson, as humans are not naturally good with delayed gratification. However, you can make it a fun habit to adopt.

   For example, if your child receives an allowance, help them divide it into three jars: Spending, Saving, and Giving. If they want a new video game that costs more than their 'Spending' amount, they'll need to use their 'Saving' jar. This makes the abstract concept of saving for a goal a tangible, physical process they can see and control. Once children learn to put aside a portion of their allowance, it becomes a powerful habit they carry with them for life.

3. Maximize Your Assets and Limit Your Liabilities

   This is another important lesson from Rich Dad Poor Dad. Teach your children that assets are anything that puts money in your pocket, whether those are businesses they own, properties they rent, or stocks they trade.

   Liabilities, on the other hand, take money out of your pocket. Your children need to know the difference. Liabilities include things like rent, weekly grocery bills, and holidays. While liabilities are unavoidable, if you manage your assets correctly then you won't have to worry about them.

   You can simplify this with a practical example. Explain that buying a toy car is a liability because it doesn't earn them anything. However, if they were to buy a small lawnmower and use it to mow the neighbours' lawns for a fee, the lawnmower becomes an asset because it's a tool that helps them earn more money. This helps them grasp the core difference between things that cost money and things that make money.

   Teach your children these fundamental principles. The earlier they learn how to invest their money in assets while limiting their liabilities, the more time their assets have to grow.

4. Develop Financial Literacy

   "A fool and his money are easily parted."

   It’s not hard to find stories of people who come into millions of dollars and then within a year are broke again. Teaching your children financial literacy will ensure that one day their money will not make fools of them.

   The best place to start is by teaching them to spend less than they earn, and by teaching them how money itself works. Part of this is understanding where money comes from. It is helpful to explain the connection between your work and your salary. You can say, 'I go to work to help my company, and in return, they pay me money. We then use that money to pay for our house and our food.' This demystifies the idea that money just appears from a bank and connects it to the real-world concept of labour and value. With such lessons, they will come to learn the true value of money and how to control it — rather than the other way around.

5. Understand the Basics of Family Finances

   Don’t make money a taboo in your home. Show your kids how you handle your own finances once they’re old enough to understand things like monthly bills. Trent Hamm, founder of The Simple Dollar, suggests starting with bills that are relevant to them, like the internet or mobile phone bill.

   Another good example is the grocery bill. Before you go shopping, you can show them the budget for the week's food. While in the store, let them help you keep a running total on a calculator or phone. This turns a routine chore into a live-action lesson on making choices within a set limit. Many of us learned that these are inappropriate discussions for parents to have with their children, but keeping family budgets a taboo shuts off an important avenue for skill-building that children will carry with them throughout their lives.

Conclusion

Teaching kids about money requires paying attention not only to the basics of finance but to our own habits as well. By making these five lessons a part of your regular conversations, you have a much better chance of raising financially savvy individuals who have the skills they need to build a secure and independent future. The goal is to demystify money, making it a practical tool rather than a source of stress, and that education starts at home.