Even if your money habits aren’t gold standard, it’s important to talk with your kids—and regularly—about spending, saving, and giving. Here’s how.
Parents have a lot of questions for Ashley LeBaron-Black: Yes or no to allowance? Who foots the bill for college? Should kids know their parents’ salaries?
LeBaron-Black, a BYU family life assistant professor, specializes in financial socialization—how parents teach kids about money. And she hates to break this to you, but we’re shortchanging our kids.
In nearly 50 peer-reviewed studies, LeBaron-Black has measured not only how today’s emerging adults learned to navigate finances in their youth but also how they’re faring amid soaring rent, home, and higher-ed costs. Combine that with low financial literacy rates and high debt, and you can see why LeBaron-Black views the big picture as grim. “It’s harder now to be doing well financially than it used to be, which means we have to do a little bit better as parents,” she says.
The good news: parents can move the dial. Whether or not they intend to be, parents are the number one source of financial learning for their kids. Parental teaching is more salient than financial literacy courses, peers, jobs, and media combined. “Kids are going to learn so much from you—the good and the bad,” LeBaron-Black says.
Here, find her best practices to impart the good, augmented with examples and tips from personal finance gurus Jim Brau, a current BYU Marriott professor, and Bryan Sudweeks, a recently retired finance professor. These three experts agree that you don’t have to be a maven at money management to raise a savvy saver, spender, and giver.
“The most important thing is being intentional,” LeBaron-Black says. “Be even just a little more intentional at doing even a little bit more.”
Don’t Let Money Be Taboo
For some parents, talking to kids about money is as awkward as talking about the birds and the bees. “Many parents treat it as a one-and-done conversation,” LeBaron-Black says. “They think they can tell their kids all they need to know in one sitting.”
Why the hesitation? Some parents don’t feel competent in financial concepts themselves. Others report fears that it will put financial stress on the kids, especially if money is tight.
On that front, the research claps back. “If there’s financial stress in the home, we find that kids are already picking up on that,” LeBaron-Black explains. “It actually helps to alleviate stress to have a parent say, ‘Here’s what’s going on, and here’s what we’re doing about it.’”
Affluence creates its own blind spots. “We find that more privileged kids are often shielded from financial thinking and responsibility,” LeBaron-Black says. “Parents might perceive it as loving to provide this carefree environment for their kids.”
Many parents also want to keep their finances private; they don’t want kids blabbing to the neighborhood. While talking salaries with your kids may seem taboo, the experts advocate for as much transparency as kids are ready for developmentally.
“I wouldn’t tell a five-year-old my salary,” LeBaron-Black says, “but a teenager is ready to understand—and needs to understand—as they start thinking about their own career options and the standard of living those careers afford.”
Budget at the Kitchen Table
Talk is cheap, say the experts: your advice goes further if you model healthy financial behaviors yourself.
“We find that young adults generally manage money much the way their parents managed money,” LeBaron-Black says. This means they’re apt to repeat your financial faux pas, be they sins of commission (like overspending) or omission (not investing early enough). “It puts some responsibility on parents to get their own act together.”
But even parents who are good money managers can miss the mark if those healthy habits are not visible. “Those examples only stick if children have the opportunity to see them and to learn from them. That means taking your kids with you to the bank. That means budgeting out on the kitchen table instead of behind closed doors.”
The precursor to that kitchen-table visual, Brau is quick to point out, is to have a budget. “I’m amazed at how many families don’t,” he says. Between autopay and loose spending habits, many parents are modeling a casual approach to finances, from eating out all the time to overextending for a nicer house.
“As parents, we need to pay our tithing first, spend less than we make, and contribute to savings accounts—both a rainy-day account and a long-term savings account,” Brau says. “And you model that starting when kids are three years old.”
You read that right: three. The research shows that toddlers can learn basic concepts, like value and exchange, and a Cambridge study shows that money habits are already formed by age seven.1 “How early should I start teaching my kids about money? As soon as possible!” LeBaron-Black says emphatically.
LeBaron-Black was 10 years old when her parents dug out Monopoly money to illustrate how much they made in one month. “I remember thinking, ‘Whoa! That’s so much!’” she recalls. From that stack they then counted out the mortgage, car, groceries, and utilities, until there were just a few bills left. “It was hugely eye-opening,” LeBaron-Black remembers. That experience taught her a valuable lesson at an early age: “Life is expensive, and we live within a budget.”
Correction: you live well within that budget, Brau says, relaying a line from his teenage son: “Pa, I thought we were the poorest family in the ward because you constantly told us we could not afford things.”
Show Them the Money
Here it is, LeBaron-Black’s most important piece of advice: kids need hands-on experience managing their own money. Lots of experience.
“Actual hands-on experience with money was tied so strongly to kids’ future financial self-efficacy—to all kinds of financial outcomes we want them to have later in life,” says LeBaron-Black, whose article in the Journal of Family Issues explores the value of experiential learning.2 Babysitting, mowing lawns, and setting up a lemonade stand are excellent, but a small allowance really teaches ongoing money management. Should it be tied to chores or just doled out, posing the risk that kids will see allowance as an entitlement? The research offers no definitive answer—and the debate is vigorous. LeBaron-Black suggests a middle-ground solution, with parents expecting some jobs to be done as part of contributing to the family and paying for other jobs that are defined as extra. “The key,” she says, “is that money is regularly in kids’ hands to practice building these habits.”
One such habit is immediately divvying earnings into three accounts: give, save, spend. “For little kids, it’s really helpful to have one of those piggy banks with three slots, or even labeled jars,” LeBaron-Black says. Arrive at a percentage for each category, say 10-30-60, and follow it consistently.
“You want to name every dollar,” Brau adds. And you want to show your older kids how to set up these same categorical, automatic transfers when they start earning direct-deposit paychecks.
Physical paper money is best for young kids’ cognitive development, LeBaron-Black says. And then when the “save” jar fills up, it’s off to the bank. “Little kids can start getting used to not spending all of their money.”
As terrifying as it sounds, teens need practice with a credit card too. One asterisk here: Drill the resounding finding that people spend less when they pay with cash. Walk teens through the true cost of paying only their minimum credit card payment. Make sure their credit limit is low, then step back. “Kids need the latitude to learn,” LeBaron-Black says, even if that includes making mistakes. Better now while the stakes are low, she says; a twentysomething’s mistakes are liable to involve “much larger chunks of money.”
Sanction Saving
Every kid needs to experience that crowning feeling of working and saving up for something, experts say. Take Coqui, the Brau family dog.
“We did not want a dog,” Brau relays. “My son begged for years.” Brau and his wife made their son tally the total cost of dog ownership, not just the up-front cost, and allowed him to save. “We’d go to Cold Stone Creamery as a family, and he would just order a cup of water. He did this for four years.’”
On sabbatical in Puerto Rico, where the floors are cement and ideal for puppy-training, the Braus relented. “We went from pound to pound until he found the exact dog he wanted, and he paid for it with his own money that he’d saved since kindergarten,” Brau says. “To this day our son is so careful with his money. He’s in law school now with no debt. He’s crushing it.”
The practice of truly earning something “sticks in your soul,” says LeBaron-Black, and the story becomes something young adults will retell with pride—perhaps most importantly to themselves.
Another exercise she recommends: Make a family savings goal. Whether it’s to make necessary cutbacks or fund a trip to Disneyland, let your kids have a say. “It can be conversations like, ‘We could cut $50 a month by canceling a couple of subscriptions or eating out one fewer time a month,’” LeBaron-Black says. “Give kids options.” They’ll be more engaged—and the lessons will be all the more memorable.
Incentives boost morale too. “When our kids wanted things, we’d tell them, ‘Look, you pay half and we’ll pay half,’” Sudweeks says. And for every dollar their kids saved for college and missions, they offered a parental 2:1 match. If that’s not feasible, teach kids how to comparison shop and let them keep the difference if they find a better price.
Sudweeks offers one final caution: have your kids earn the total cost of an item before buying it. “We never said, ‘You can pay us back,’ because that’s debt.”
Make It Interesting
There are a few capstone concepts that should absolutely be part of your kids’ financial tutelage; among them, the wonder of compound interest. “There are lots of options on how to do it,” LeBaron-Black says. The goal is to plant the seed of long-term investment.
Consider starting a “family bank” with a 10 percent interest rate, then pay interest on the preset terms. When kids are ready to level up, try a Sudweeks family tradition. “When our grandkids turn 14, we set up a custodial Roth account and teach them the basics of investing,” says Sudweeks, who details this and other investment options at personalfinance.byu.edu/helpingothers. The website is essentially a free personal finance class; use the financial calculators there, he says, to show kids how money can grow.
“Investing is not rocket science,” Sudweeks says. His advice for your kids: Find a tax-sheltered place to park savings, like a Roth account or a 529 college savings plan. Within those accounts, choose to invest in low-cost index mutual funds, which diversify risk and perform just as well as or better than funds that have expensive management fees.
And parents, if you can, start putting money in when your child is born. “By the time our kids had gotten to college, the markets had paid for half of their educations,” Sudweeks says. Merely having an account in their names (even if it has next to nothing in it) makes them six times more likely to go to college.3
When it comes to striking a balance on how much to contribute to your child’s college education, know this: BYU research advises against free rides but also finds that working through college is a risk factor for dropping out.4 Further research shows students who work part-time (but under 20 hours) get better grades.5
“A little bit of struggle is good for people,” says LeBaron-Black, who is grateful her parents supported her during her freshman year—and grateful they cut her off after that. She lived on a $150-a-month food budget until the end of her PhD. “I learned that I can be really frugal.”
Create a Genealogy of Generosity
Just by practicing a religious tithe, you are opening your kids’ apertures to giving—a practice you want to imbue. “Being generous is not the first thing people think of when we’re talking about financial literacy and financial health, but it’s important,” LeBaron-Black says. The literature shows people who give charitably are happier, gain health benefits such as lower blood pressure, and—get this—make more money themselves.
In addition to tithing, Sudweeks says, a regular topic for family discussion should be “How do we want to take care of the Lord’s poor?” Sudweeks recommends earmarking a percentage for giving, one that grows in tandem with abundance—bucking the standing societal trend of donating less percentagewise when earnings increase. “Why should our giving decrease as our blessings increase? Giving should be part of your family’s mission and vision,” he continues. “If we demonstrate this stewardship, we will make giving, strengthening families, and building Zion an important part of our children’s lives and characters.”
In addition to religious donations, consider how you can involve children in volunteering, in interpersonal giving to friends and family, and in charitable giving to other organizations and causes you value. Do they know how you want to make the world better?
“Too often I think we go through life on autopilot,” LeBaron-Black says. “Stop and think, ‘Does my budget and how I’m actually spending reflect what I care about, and am I passing that on to my kids?’”
Generosity also taps into something bigger, LaBaron-Black says—into “the very meaning of money and why we should want it.” Money offers stability, but after we have achieved that, it should become a tool to help others.
“This is your financial story,” she adds. “Your kids are picking up on it.”
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About the Author
Brittany Rogers, a freelance author, lives in American Fork, Utah, with her husband and three children. She is still saving for the horse she wanted as a kid.
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Notes
- See David Whitebread and Sue Bingham, Habit Formation and Learning in Young Children (London: Money Advice Service, 2013).
- See Ashley B. LeBaron et al., “Practice Makes Perfect: Experiential Learning as a Method for Financial Socialization,” Journal of Family Issues 40, no. 4 (March 2019): 435–63; see also Ashley B. LeBaron-Black et al., “Finances and Fate: Parent Financial Socialization, Locus of Control, and Mental Health in Emerging Adulthood,” Emerging Adulthood 10, no. 6 (December 2022): 1484–96.
- See William Elliott III and Sondra G. Beverly, “The Role of Savings and Wealth in Reducing ‘Wilt’ Between Expectations and College Attendance,” Journal of Children and Poverty 17, no. 2: 179.
- See Laura M. Padilla-Walker, Larry J. Nelson, and Jason S. Carroll, “Affording Emerging Adulthood: Parental Financial Assistance of Their College-Aged Children,” Journal of Adult Development 19, no. 1 (March 2012): 50–58.
- See Lauren Dundes and Jeff Marx, “Balancing Work and Academics in College: Why Do Students Working 10 to 19 Hours per Week Excel? Journal of College Student Retention: Research, Theory, and Practice 8, no. 1 (May 2006): 107–20; see also Gary R. Pike, George D. Kuh, and Ryan Massa-McKinley, “First-Year Students’ Employment, Engagement, and Academic Achievement: Untangling the Relationship Between Work and Grades,” NASPA Journal 45, no. 4 (Fall 2008): 560–82.
