Consider the financial decisions you’ve made throughout your life. Do you have any regrets? Maybe you wish that you wouldn’t have racked up so much credit card debt, or maybe you’re kicking yourself for not investing sooner. Regardless of your financial past, you have the opportunity to give your family a bright financial future. You can help your kids build financial literacy by sharing the fiscal knowledge you’ve learned throughout your life. Then, they’ll know how to avoid the money mistakes you made! 

In this article, we will define financial literacy and share why it’s important to develop it as early as possible. In addition, you’ll learn six ways to build financial literacy in your kids. 

What is Financial Literacy?

Two friends counting saved money and looking cheerfulFinancial literacy is the ability to understand skills such as budgeting, investing, and planning for retirement. These skills can help an individual confidently manage their finances while providing for themselves and their family. Theoretically, the more financial literacy you have, the more peace you have about your finances. And isn’t peace a great gift to give to your kids?

Unfortunately, the financial services industry is fairly complex and often uses terms that speak over people’s heads. For instance, Wall Street tends to be too complicated, too expensive, and it ignores Christian values. The Bible teaches a different kind of financial literacy than our culture does, so it’s important for parents to model the truth for their children. As Christians, we’re called to have a healthy heart and mindset when it comes to money. Jesus encourages building wealth and financial stewardship (Matthew 25:14-30), but he also warns against serving money (Matthew 6:24). These tensions are difficult to balance, but discipling your kids in this area will produce results. Proverbs 22:6 says “Train up a child in the way he should go; even when he is old he will not depart from it.” You can help your kids develop a foundation of Truth by teaching them things such as  how to be a good steward of their resources, live generously, and trust God as their provider.

Why Else is Financial Literacy Important?

Kid earning money for future

As with anything in life, the earlier you start learning, the more time you will have to get knowledge and develop wisdom. If kids don’t have experience handling money when they’re young, they won’t have a paradigm for understanding what they can and can’t afford. 

The first step in financial literacy is to know how to spend less than you make. That’s an easier lesson to learn when your kids are under the cushion of your protection rather than when they’re out in the real world! If your kids can learn how to spend less than they make when they’re young, they can jump into the next levels of financial literacy–investing and legacy planning–much sooner. The earlier your kids learn how to invest, the longer they have to accrue interest on their returns. It will make a significant difference in your kids long-term wealth if they start investing in their late teens or early twenties rather than later in life.

The earlier your kids gain experience with money, the more prepared they will be for more complicated financial situations later in life. That’s why developing financial literacy in your kids is so important. When they understand the value of a dollar from a young age, their dollars can go much further! With that being said, here’s how to build financial literacy in your kids in six steps.

6 Ways to Build Financial Literacy in Your Kids

Mom giving her daughter money and teaching her about finances

  1. Involve Them in Your Process 

It’s important to talk about financial literacy with your kids, but modeling it can be even more valuable. An easy way to start this is when you go shopping. Create a list with your child. If you shop sales, take them through the ads you look at when considering where to shop. Then, demonstrate how you stay on budget by only purchasing items on the list. Teach them how to get the most bang for their buck by showing them where to find the cost per unit of items in the grocery store. Aside from groceries and shopping, you can explain your overall budget to them as well. When they get a little older, involve them in bigger financial decisions. 

  1. Give Them The Opportunity to Manage Money 

True learning comes from experience. So, give your kids opportunities to experience how money works! A way to do this is through providing an allowance. Use the allowance as a teaching opportunity about budgeting. Talk to your kids about their financial goals. Maybe they have toys or clothes they want to buy, or maybe they want to join extracurricular activities. Show them how to categorize their allowance so that they can reach all of their goals. For instance, you could show them how to set up different accounts (or envelopes if they’re not ready for a bank account) for spending, saving, and giving. Through this practice, kids will learn early on how to not spend more than they make.

Chores are another way to teach your kids how to manage money. They instill responsibility and show your kids that money doesn’t come for free. You can have chores that your kids perform as a contributing member of the household, but you can also have extra chores that you hire your kids to do. For example, if there’s an office that needs organizing or a room that needs painting, you can offer a reasonable wage to your kids if they want to make some extra cash. There are a number of ways to get creative with age-appropriate chores, and your kids will learn that there are various opportunities to earn more money! 

  1. Teach Them How to Invest

Once your kids know how to earn and save, they can move onto the next part of the financial literacy lesson plan–investing. You don’t have to get into the weeds of the stock market or purchase big real estate properties in order to learn the basics of investing! As the cliche goes, you have to spend money to make money. You can teach kids how to think through the business concept of risk and reward by showing them how to leverage the money they already have. 

For instance, an older child might benefit from using some of their funds to purchase a pressure washer. Though it will use up some of their savings, the money they could make detailing people’s cars and cleaning houses could make them a tidy profit in the long run. Or, if your child likes to bake, show them how to invest in their own ingredients and baking equipment. Then, get creative with them about how they can sell their goods. This is a great way for children to develop an entrepreneurial spirit and learn that they can monetize activities they enjoy!

  1. Educate About Debt 

Debt is widespread in America. It feeds instant gratification, and this enjoy now, pay later mindset is extremely detrimental to the wealth building process. Help your kids understand that they have to pay off any loan they accrue (with interest). It’s also a good idea to explain how debt works, including interest rates, monthly payments, and terms. It’s better to learn about debt when there’s less to lose!

When your kids are old enough, you can walk them through the process of getting their first credit card. In order to work up to the best credit score, encourage your kids to pay off their card at the end of each month and never exceed half of their maximum balance.

  1. Let Them Make Mistakes 

The younger you are, the cheaper the lessons. For instance, if your kid ‘goes broke’ as a 12 year old, it’s less expensive than if they made mistakes in their twenties when they have the burden of rent, loans, car, credit cards, etc. Do your best not to micromanage your children’s financial decisions, even if they’re made with the allowance you give them. For example, we offered to pay half of the cost of my son’s first car up to a certain dollar amount. We found a car that he loved, and when we test drove it, it started smoking. I advised him not to buy it, but I let him know that the choice was his to make. He bought it, and the engine blew out two weeks later! He fixed it, and another week later, the transmission blew out. A lot of money was put into that car, and my son definitely learned his lesson. Now he’s not only great with working on cars, he’s debt free with an engineering degree, and doing well financially. Though the mistakes may hurt your kids in the present, they could make them rich in the long run. 

  1. Encourage Peace and Patience About Money Matters

Money is the top stressor for Americans, but that doesn’t have to be the case for you and your family. The Bible has several teachings on money and God’s financial provision, including Matthew 6:34, “Therefore do not worry about tomorrow, for tomorrow will worry about itself.” Teach your children that God is involved in the financial process, so there is no need to become stressed or money obsessed. A major way you can do this is by praying over your finances as a family. Model peace for your kids–do you openly trust God with your finances, or do you worry and stress aloud?


Proverbs 20:21 teaches that “an inheritance gained hastily in the beginning will not be blessed in the end.” This could be because someone who becomes rich quickly hasn’t developed the financial literacy to steward the money. It’s too much all at once. Think about all of the lottery winners who lose all of their money and wind up worse than before because they spent everything too fast! Similarly, financial literacy is important to instill in your kids when they have little because they will know how to steward it well when they have a lot. 

I hope this article has given you the tools to know how to build financial literacy in your kids. If you would like to have counsel regarding your family’s financial future, we encourage you to schedule a free consultation with Clear Money Path. We offer legacy planning, which includes family meetings to ensure heirs are prepared to receive their parents’ financial legacy. Together we’ll create a financial plan that is fruitful and biblically responsible!

Information presented does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information on products and services. This information should not be construed as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.

Information presented is believed to be factual and up-to-date and was obtained from sources known to be reliable. It should not be regarded as a complete analysis of the subjects discussed.  

All expressions of opinion reflect the judgment of the author as of the date of presentation and are subject to change.Clear Money Path is registered as an investment adviser with the state of Missouri. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.