Every parent wants to see their child better off than they were. Setting our children up for financial success involves more than what we leave them in the will. It’s what we teach them – how to steward, grow, and preserve their wealth.

That said, money management is a tough concept for kids and teenagers. Even young adults may not fully grasp the principles that drive wealth-building. As an investor, part of your job is to equip the next generation to follow in your footsteps.

Here’s our advice on how to drive those lessons home!

8 Tips for Parents Teaching Money Management & Investing

Tip #1 – Use physical currency.

Fewer and fewer people carry cold, hard cash these days. While there are advantages to cards and digital balances, something is lost there, too. You may have seen advertisements for kids’ debit cards that parents can contribute to or freeze as needed. Convenient, yes, but many children are visual learners.


They may not understand money and the opportunity cost when their dollars and cents are theoretical. When giving out an allowance, use cash. Physically show them how the amount of money they have dwindles with purchases. This helps instill the value of money, needs versus wants, and opportunity cost.

Tip #2 – Demonstrate diversification.

Diversification is one of the core lessons of any investment method. You can teach your kids this principle by demonstrating the idiom, “putting all your eggs in one basket.” Take a carton of eggs (or plastic eggs) and put them all together in one container. Ask what would happen if, say, a car ran over the basket. All the eggs would be crushed! But if you kept each egg in its own basket and spread them out on the street, only a few eggs would be ruined. 

That’s diversification!

Tip #3 – Open a custodial account.

They say the best way to learn is by doing. Open a custodial account (like a UGMA or UTMA) where your kids can start investing under your supervision. This is best suited for teenagers with a good grasp of the basics.

Tip #4 – Set achievable financial goals with your child.

Ask your child about something they’d like to save up for. Maybe it’s their first car, a gaming computer, or an overseas family vacation. Help them set financial goals they can meet through regular contributions to an investment account. You could, for example, help them use a Roboinvestor, like Betterment. They can see their money grow in service of a goal that they value.

Need to get on the same financial page with your spouse, too? Read our blog: Keys to Smart Investing When Your Spouse Has Different Goals.

Tip #5 – Start young.

Most children start asking about money in their preteens, but they may begin before age 10. Be prepared before that day comes! Use simple analogies, teach about the difference between saving and investing, and take them grocery shopping to learn about budgeting.

Tip #6 – Visualize inflation.

Why should your child invest instead of relying on savings alone? Savings, after all, is simpler and less risky! Help your child understand inflation. Show them how prices have grown over time with an easy example. Consider milk prices. In 1995, a gallon of milk cost roughly $2.50. Today, that same gallon of milk would cost $4.82 – almost double the cost! Show your child that you can set aside that $2.50 in savings to buy milk in a few years, but by the time you’re ready to buy it, it costs a lot more!

Tip #7 – Involve them in family finances.

Traditionally, parents keep their children out of financial decisions and budgeting. This is partly so kids wouldn’t worry if money was tight or feel undue stress and responsibility for family finances. However, involving your child in age-appropriate ways and including them in some financial conversations is ultimately beneficial.

Talk about your own investments and financial decisions. Show them your investment statements and explain your strategy and goals. Allow them to ask questions!

Maybe set a family investment goal together and discuss its performance over time.

Tip #8 – Utilize online resources.

If you feel ill-equipped to teach your child about finances, you’re in luck. There are countless resources out there to help kids understand fiscal responsibility. There’s BizKids, which provides paid financial literacy courses for kids. The Stock Market Game is a low-stakes stock simulation for teenagers.

Just run a quick search – you’ll be amazed at what resources are available to come alongside and reinforce your efforts.

Start investing with REI Nation, where you invest and we handle the rest!