Are You Teaching Your Kids Personal Finance Management?

Are You Teaching Your Kids Personal Finance Management?

Oscar Cordoba, External Affairs Specialist, Affinity Federal Credit Union

According to a 2019 study from, credit card debt has recently topped $1 trillion.1 Sending our young adults out into the world without any real education on how to manage their financial risks, thus adding to this problem. But teaching children how to create a budget, save their allowances for future purchases and setting financial goals early will help create a sense of purpose by empowering them to manage their finances responsibly. So where (and when) do you begin to teach personal finance management to kids?

baby on computer

How old do your kids have to be to understand personal finance management?
Children as young as three years old can understand the basic concept of saving money. In a society based on instant gratification, it’s rewarding to see small children save to purchase something they want, even though it may mean waiting for it. And while you may not go ahead and give a three-year-old a credit card, this just goes to show that kids can start working on basic saving and money management skills at a much younger age than you might think.

What are some resources you can use or trusted methods for educating your kids? Talk about money at home. In a 2019 T. Rowe Price Study, 44 percent of parents said they’d never talked to their children about the value of long-term investing.2 If you want your kids to learn about saving, it must be an ongoing discussion at home. A great resource, available to Affinity Federal Credit Union members, is the Enrich platform. Enrich is designed to provide education modules to children as well as parents, where they can learn about personal finance. Many of these lessons can be applied to teach children how to manage their money, create a budget and save for the future.

Is there a good system for slowly giving your children more financial responsibility over time?
Giving your child an allowance can be a great starting point to teach them about finances while teaching them to be responsible and helpful at home. Playing games with kids is a successful method because children respond well to play. Some of those games could be to collect coins around the house and use what you find to contribute to something fun for the family at the end of the year. And setting up a good old-fashioned lemonade stand is a great way to introduce kids to the lessons of running a business. But make sure they pay for the ingredients for the stand; this will help them learn how hard it can be to make money, as well as the concept of net proceeds from sales.

What's a good way to start teaching kids about budgeting and finances?
After you introduce your children to fundamental concepts, you’ll want to start talking about the specifics of budgeting. The first step is to help them distinguish the difference between wants and needs. Explain that needs include the basics such as food, shelter and clothing. Show them your own budget to help them understand the difference between the two concepts. Setting up savings goals is important because with a defined savings goal, children are more motivated. Help them break down their goals into manageable bites so they can see the progress they’re making on their journey. Provide them a place to save; establishing a savings account at your local financial institution is an easy way to show them how their balance grows and exposes them to visiting their local branch. Affinity provides special Youth Accounts, designed for children under the age of 12, that allow our young members to earn dividends and receive cash rewards based on the increase in their account balances.

Lastly, leave room for mistakes. Part of putting kids in control of their own money is letting them learn from their errors. It’s tempting to step in and steer kids away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment. In that way, they’ll know in the future what not to do with their cash. Nowadays children have become more digitally native, so the use of technology and mobile apps such as “Mint” can help teach a child to start a budget and keep track of their spending from the palm of their hands.3

If my teenager gets a job, what can we do to walk them through treating their income wisely and learning to save money?
At some point your kids aren’t children anymore, and yet they haven’t learned all the financial lessons they’ll need for adulthood. Getting a summer or part-time job is a great way to get acquainted with the world of work, as well as begin making decisions with your money that have a real impact. One way to teach a teen with a job to save money is to take advantage of direct deposit, if their employer offers it. The teen should establish a savings account and assign a certain percentage or amount to go directly into that account every time they get paid. If your child does not get direct deposit, another way to save would be to set up an automatic transfer from their checking account to their savings account a couple of days after they get paid and after their cash or check is deposited into their checking account. That way they can feel confident that their obligatory savings are taken care of before they start spending the money left over in their checking account.

Affinity offers a special Teen Account for kids aged 13-16, which offers no minimum deposit requirements and eligibility for Affinity’s scholarship program. For older teens, the Affinity Revolution Account offers competitive rates and perks, in both checking and savings.

Starting your kids off right can save them (and you) money in the future
You don’t want to go overboard with your kids and factor budgeting into everything they do. But getting them started on personal finance management early can bring them rewards that last a lifetime and help them avoid the cycle of debt that too often afflicts young people. And ultimately, teaching your kids good personal finance skills now helps you down the road, by allowing them to help you in your old age (or at least not have to come to you for money!).


This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.  

1 Retrieved from

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3 Retrieved from