Having a child is life-changing for most first-time parents. All of a sudden, your emotional, physical, and financial efforts shift from your needs as individuals to focusing on keeping a helpless, tiny human alive and thriving. Hormones like oxytocin pump through your brain and body to communicate how important it is to safeguard this precious new life.
After the initial rollercoaster that is the newborn and toddler years, things tend to settle a little (unless you have other babies), and you finally have space to ask bigger questions, rather than running around on minimal sleep, dirty diapers in hand, wondering when you’ll ever have time to read the now-dusty novel that’s been sitting on your shelf for the last few years of chaos.
Hyperbole aside, this is a great time to start thinking about how to set your child up for the rest of their lives: planning for their education, health, overall personal development, and… financial literacy. If you can get your little one started on all of these early, you could set them up for long-term success.
How to Set Your Child Up For Financial Success: Financial Literacy
Let’s circle back to that last point: financial literacy. As parents, it could be easy to overlook your child’s financial affairs, but if you don’t start thinking about it sooner rather than later, your child may never adopt a healthy financial outlook. Schools are increasingly wising up to this educational need, but without parents like you modeling the right, transparent practices at home, even the good teaching they receive in the classroom might not stick.
That means that the main responsibility — and privilege — falls to you. But have no fear! We believe this can be a great opportunity, not a burden. As a modern paraphrase of some ancient wisdom says, “Point your kids in the right direction — when they’re old they won’t be lost.” (Proverbs 22:6, MSG). You have the chance to keep your kids on the right track for life.
Throughout the rest of this article, we are going to suggest the three most important values and practices you could adopt to keep your children on the financial “straight and narrow” — 1) Authentic Modeling, 2) Shared Participation, and 3) Patience & Understanding. We are convinced that these three keys could profoundly shape your child’s financial future.
1. Authentic Modeling: Practice What You Preach
The consensus is clear: children learn most effectively by example. It’s human nature for kids to watch and internalize their parents’ behavior — whether good or bad. So if you’re wondering how to set your child up for financial success, the answer starts with you: you need to authentically demonstrate healthy financial management.
If you and your spouse can consistently and openly model wise financial practices — like budgeting, saving, and thoughtful investing — and invite your child into conversations around those, whenever possible, your child will most likely absorb these same habits as normative for their life, even after they grow up, leave home, and chart their own path in life.
Perhaps the most powerful way to model good financial behavior is by transparently sharing your financial journey with your children, and making sure to discuss both your successes and failures. This kind of dialogue can help your children understand the complexities, learning mindset, and rewards associated with lifelong financial responsibility.
In the spirit of practicing what we preach, Greg Liszka (CFP®, RICP®), President & Advisor at Iron Point Financial, tries to facilitate this kind of conversation with his clients and their children (though those ‘children’ are usually a little older):
“If our clients are willing, at some point I have found that it can be healthy for the client to bring the next generation in. To what degree they want them to know everything, well, that’s up to them.
But just having this introduction to the next generation, opening the door on what we’ve been able to accomplish for their parents, can help to preserve those assets long-term. Then we can start a relationship with that next generation, and continue on.”
In short, by inviting your children into financial planning conversations, big or small, you can model responsible financial behavior in a way that is likely to impact not just the next generation, but potentially many generations to come.
2. Shared Participation: Learning Through Doing
Dialogue and education are a great first step, but it shouldn’t stop there: if you really want to set your child up for financial success, you will likely need to get practical… together. Shared participation in practical financial tasks can provide children with the hands-on experience they need to navigate finances well on their own later in life.
Some great examples of this include things like:
- Budgeting Exercises (perhaps when you’re helping with math homework, you could bring in real-life budgeting examples, or you could play age-appropriate financial games together),
- Grocery Shopping using a spending limit (you could equip your child with a trolley, calculator, and budget, then go around the store together),
- Opening & Managing a Bank Account together, and setting up recurring ACH payments to build up their credit score, for example, to pay for a phone contract (while explaining how your credit score can influence other major life decisions later on).
This practical, shared approach can become meaningful quality time with your children, transforming what might otherwise seem mundane, boring, and ‘extra’ into an engaging, valuable, and maybe even fun(!) learning experience. It reinforces the message that financial management is an integral part of daily life, not something abstract or distant that “only adults have to think about.”
It’s also a great way to build on the first principle — practicing what you preach — by giving your children plenty of opportunities to see what you would do in different hypothetical and real-world financial situations. When your children see your words matching your actions — and coming alongside them in those very actions — they are far more likely to internalize those lessons in a deep way.
3. Patience & Understanding: Allowing Room for Growth
Financial literacy, like any important life skill, can take time to cultivate. It requires patience, empathy, and understanding from loving parents like you. Your kids are bound to make mistakes along the way—overspending their allowance, failing to save for something they really want, or generally misunderstanding financial concepts. The important thing to remember is that these moments of struggle can actually be great opportunities for deep learning.
Instead of rushing to “fix” their mistakes straight away, you might want to approach these moments as valuable teaching opportunities. You can provide guidance and support, gently helping them understand the consequences of their decisions while pointing them back to what might be a better path, without forcing them to obey you. This invitational approach can nurture their personal accountability and sense of independence— both essential qualities for long-term financial success.
The alternative—doing everything for your child as a “helicopter parent”—risks undermining their financial (not to mention personal), development. Ideas like setting up a 529 or a trust fund for them can of course be wise and beneficial, but we would strongly advise complementing those parental decisions with plenty of participation and teaching options of the kind we have discussed above.
Without active participation and real understanding in your child’s mind, the structures you create to help your children can inadvertently spoil their chances of developing genuine financial responsibility and independence. Consider, for example, the assumption that your child must go to college; what if you took the time to talk through different life options with your child before setting up a 529 fund? If we want our children to succeed financially, being patient enough to see them take ownership of their decisions is going to be an essential part of the process.
Practical Steps for Financial Success
Now that we have discussed our three key values for setting your children up for financial success, we have a few more practical suggestions you could implement as both starting points and checkpoints for their ongoing growth in financial literacy.
- Schedule Regular Family Financial Meetings: Discuss your family’s financial situation openly and regularly, inviting your children to ask questions and express their opinions. They might not be the ultimate decision-maker, but by modeling transparency, you can foster greater understanding.
- Implement Allowances with Responsibility: Provide a regular allowance tied to household tasks, savings goals, or budgeting exercises to teach financial accountability. Over time, these practices can help them understand what it might be like to get an ‘adult job,’ creating a clear bridge between their present reality and desired future.
- Set Financial Goals Together: Collaborate with your children to set short- and long-term financial goals, helping them understand the power of intentional saving and investing. For example, if they wanted a particular video game for their Playstation or Xbox, that could become a short-term goal.
- Introduce Basic Investing Concepts: Discuss simple investing concepts such as compound interest, the theory behind diversifying your investments, and why long-term financial planning can be a good idea (e.g. if you work with a financial planner like Iron Point Financial, you could share your experience of that process and relationship).
Building a Legacy of Financial Literacy
One of the last thoughts we want to leave you with is that financial success isn’t just about arbitrary wealth accumulation—it’s about fostering independence, responsibility, and wise stewardship of the resources you have been entrusted with.
When you, as a parent, can authentically model financial wisdom, encourage shared participation, and practice patience and understanding with your child, you’re doing far more than teaching practical skills; you’re shaping your child’s character and equipping them for a lifelong journey of prudence, generosity and personal growth.
Ready to Build a Shared Financial Roadmap?
If you want to teach your children the right way to go, but you aren’t sure what that means for your own finances, why not reach out to us to schedule an appointment, so we can create a shared financial roadmap that suits your goals and values?
When you know exactly which path you are taking, it gets so much easier to invite your kids to come with you. Together, let’s make sure your kids don’t get lost in the dark and scary ‘financial woods’, but instead know where the right path is — the one that leads to a life well lived.
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Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
