Sacramento Wealth Advisor
Joseph Eschleman No Comments

Preparing Your Children to be Financially Literate Adults

(and steer clear of your mistakes)

As a wealth manager, it is very important I learn about and become intimate with clients’ short and long-term personal and financial goals as I share conversations and build relationships with them. I also often learn about their frustrations and regrets regarding past financial decisions. During these sometimes difficult conversations, I remind clients that with time comes both perspective and experience. None of us are perfect, and while they, as adults, may have regrets about past financial blunders, they can learn from and build upon them. And if they are parents of school-age children, they can use their knowledge and experience to help their children steer clear of the same mistakes and missteps. With April being Financial Literacy Month, there is no better time to learn about the importance of teaching children about financial matters and helping them form good economic habits for their future.

While many parents think their child will learn financial literacy while in high school, only 17 states in America currently require students to take a personal finance course. If children are not learning about money from their parents and/or guardian, many children are left in the dark, or even worse, could learn negative financial habits from their peers or the media.

In my first Towerpoint Wealth blog post, I described how my wife, Megan, and I are teaching our two kids about responsibility and finance. No one seems to be surprised I do this – after all, I have many years of learned and applied knowledge in money management and finances. However, I have noticed that many people are reluctant to speak with their children about financial matters because of past mistakes that they have made. One thing to be clear about: you do not need to be financially flawless in order to teach your kids helpful lessons for the future.

Broach the financial conversation with your children with the confidence of knowing you are teaching valuable life skills. Sometimes these conversations even help parents take better control of their own financial situation in order to be stronger role models for their children.

Not sure which financial lessons are most important to teach? Here are 4 to consider when you prepare to educate your son or daughter on how to build a solid financial future:

1. Earning Money. One of the first experiences your child will have when it comes to financial matters is earning money. Whether you are offering a small stipend or allowance for jobs around the home, or your child has a part-time job after school, earning money through physical or mental effort helps your child associate value to labor. If you want to see the job chart we use at my house for our two young children, you can find it here.

2. The Importance of Budgeting. The topic of budgeting can be brought up at a relatively early age. Whether your child earns an allowance or is paid from a job outside of the home, discuss how he or she can create a budget with the earnings. Budgeting helps children learn the value of money and gain a clearer picture of the time and effort involved in obtaining something of value or making a major purchase in the future.

Some parents require that a child’s own earned income be used for their discretionary spending – things like going out with friends, or buying a new toy or clothing item. Be sure to help your child create a system where a portion of his or her money will go into savings, an emergency fund, their car or phone payment, etc. And, if charitable giving is important to you, instill this value early, as my wife and I have done with our kids. Actively participating in charitable giving has many intrinsic rewards.

3. The Difference of Needs vs. Wants. Because we live in a want-driven society, this is a crucial discussion to have with your child. We “need” food, shelter, clothing and security to survive – whereas our “want” is something we desire but do not depend on to live. Teach your child that “needs” should be built into their budget, whereas a splurge or extra money fund is what should be paying for the “wants” in life.

Of course, this can segue into a much broader discussion of why your child wants something – possibly because his or her friends have it, because they think it will make them more likeable, etc. There are many helpful conversations that can come from this topic that can benefit your children for years to come.

4. Saving Money. It seems like such a simple topic, yet saving money is often not discussed with younger generations. As young men and women between the ages of 17 and 25 make plans to move away from the family home, many are unprepared for the shock and strangeness of being responsible for monthly bills and being tied to contractual obligations such as rent, phone, and monthly car payment contracts.

By having a firm grasp on saving money and budgeting, your child can bypass “bill shock,” in addition to feelings of anxiety and confusion when he or she moves out of the home.

Teach younger children about the topic of saving money through the use of a piggy bank or other physically tangible savings vehicle, and older children through opening checking and savings accounts and setting up various economic goals.

Take advantage of Financial Literacy Month this April and make a plan to start having regular discussions about money with your children. Teaching them while they’re young can help them build a strong and positive relationship with money, and instill in them the value of earning money, budgeting, saving, and setting up a secure future.

For more information on how to teach financial literacy to tweens, click here, and for teens, click here. Both links offer concepts and tasks that will help them develop the financial skills they need as they prepare for adulthood. If you would like personalized financial guidance as you educate your kids about money, please call (916-405-9150) or email me ( directly for a complimentary consultation.