Four Important Financial Lessons Your Kids Need to Hear

Published on Jun 08, 2016 05:59 pm

When starting off your kids on the road to good credit, there’s a lot to learn. Credit isn’t one of those things you’re born knowing about – and managing your money is much the same. To get an understanding of its importance (and save them the many mistakes of learning the hard way), it’s vital to help kids understand the importance of how to handle money. As a parent, you’re their first teacher, so helping them build their credit skill is a natural part of parenting whether you’re a financial expert or still have some lessons to learn yourself.


The great thing about budgeting is that there’s no wrong way to get started. Once you put pen to paper, though, that’s when you have to keep testing and making changes to make a budget that fits with your life and monthly expenses. And there are more tools out there than ever before to help you track your spending – today’s tech-savvy kids are miles ahead of where we started, with no clunky calculators involved as part of the equation. Touching on the big idea that you can’t spend more than you have is the real key to setting up a budgeting backgrounder, though – make sure you kids understand the cash flow principle. While it’s sometimes hard to calculate from babysitting or mowing lawns, it’s the right place to get started.

Compound Interest

If there were a magical part of budgeting, it’s the idea that you can turn nothing into something over time. That’s the general idea behind compound interest – that savings can generate a return simply by keeping them intact. Especially when they’re at their youngest, the power of compounding interest at decent rates can take a small amount today and stretch it into something truly impressive by the time they’re ready to retire after a healthy career span. And that’s something you can help them kick off now, to help them start seeing how their money grows each month.

Categories of Savings

While it might seem difficult to explain why and how types of savings differ in the adult world, step back a bit and remember that probably one of the earliest ways you learned to think about saving was goal-based: saving now for a bike at the end of the year, or some new music in the short term, or a game somewhere in between. And that’s still applicable. What you can introduce into the equation is how savings goals mature and change over time. Think about sharing a little about what you’re saving for now: an emergency fund, home repairs, vehicles. They’re what those early goals grow into with a little time.


Perhaps the most important lesson you can teach your children is how to stay out of debt. As a parent, you’re the representatives of the Bank of Mom & Dad, so you know how much your kids are spending. Your kids can’t spend more than they have unless they turn to you. Make sure they know that sometimes you can’t have everything you want without a plan and a bit of work toward that goal. You might have better success teaching them about credit and debt if you restrict their spending to savings they already have on their own, or at least develop a payment plan in which they work to pay back money they borrow from you.

When it comes to the basics of finance, don’t let your kids go it alone. Help them see the guiderails and they’ll be on their way to success without having to learn all the hard lessons firsthand.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc., an Experian company.   © 2014, Inc.  All rights reserved.

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