Having "The Talk" with Your Child about Financial Responsibility

Tuesday, September 04 at 11:00 AM
Category: Personal Finance

There are certain life lessons that every child eventually learns with or without the guidance of their parents, but financial literacy is one talk that parents shouldn’t avoid or delay. Many of today’s youth aren’t equipped to deal with the complexities of life, including money management.  For parents, having “the talk” about financial responsibility with their child is a critical step in preparing kids and teens for their future.

Parents play a vital role in teaching their children how to responsibly handle money. According to a 2011 survey of high school seniors, 87 percent report that their parents are their primary resource for information about money management and personal finance issues, but only 22 percent report that they talk to their parents about money management "frequently.” (1)

Much like the ‘birds and bees’ talk, children desperately need guidance from their parents in order to learn appropriate money management skills. Arming our kids with this type of information now will guide them well into adulthood, so start these conversations early.

Eighty-one percent of teens say that kindergarten through 12th grade is the best time to learn money management, yet nearly 50 percent are unsure of how to use a credit card effectively. However, 24 percent still think high school or younger is when they should get their first credit card.  This illustrates the disconnect between their desire for more education and the amount of actual financial knowledge of many teens. (2)

What are the key issues parents should address when having “the talk” with their child? A basic financial responsibility discussion should consist of these areas of focus for parents to frame their conversations:

  • You need money to buy things. It seems simple, but reinforce that it is important to earn income and live within those means. This may include waiting to buy until the money is available and often involves making difficult choices about how to spend money.
  • Saving is important and takes practice.  The sooner they start saving, the greater progress they’ll make towards building good habits.  Encourage that they put money into savings frequently and help them with setting realistic savings goals. 
  • Credit should only be used when necessary.  Ensure they know a credit card is like a loan, interest will cost them more in the long run, and they should only use credit cards when necessary.  Discuss wants versus needs in using credit for purchases.
  • Protect your financial identity.  It can be costly and dangerous to divulge personal and financial information online, in-person and over the phone.  Providing this information too easily can expose them to identity theft and financial loss, so it should be done with care.
  • Life is expensive.  For older teens, make sure they know how necessities like taxes, insurance, utilities and interest on credit cards and loans are unavoidable costs they should be prepared for.   These are often overlooked and less obvious than just the rent, food or car payment.


Helping your teen gain actual experience in money management while still living in the home can be very valuable.  Many banks have savings, credit and prepaid card products available specifically designed for parents and teens to use together to start building lifelong money management skills.

In order to teach children the appropriate financial lessons at the correct age, Arvest recommends that parents and educators start by using the following resources to get more information to prepare for “the talk” with your child:

  1. arvestmoneyskills.com - The site contains financial education tips and lesson plans for Pre-K through college and for those with special needs.
  2. whatsmyscore.org - This financial management website is geared toward teens and young adults and provides relevant information on transitioning from high school to college, including how to rent an apartment and how to buy a car.
  3. mymoney.gov - A guide for any life-changing circumstance, this site provides financial information based on where you are in life – from the birth of a child to retirement. You’ll also find a list of resources and useful tools.


(1) Capital One, As High School Graduates Open their Gifts, Parents Have Key Opportunity to Talk Money Management, June 14, 2011, http://phx.corporate-ir.net/phoenix.zhtml?c=70667&p=irol-newsArticle&ID=1573673&highlight

(2) Junior Achievement/Allstate Foundation, New Poll Shows Managing Money is Today’s “Birds and Bees” Talk, April 5, 2011, http://www.ja.org/about/releases/about_newsitem588.asp

Tags: Budgeting, Credit Cards, Credit History, Financial Education, Savings
Hareiana on 9/9/2012 at 10:27 PM
My friend and I decided to take the record keeping very seriously and we started to use Out Of The Dark (OOTD) free online budgeting for this. We ended up becoming devoted budgeters and we now cannot imagine going through live without budgeting. Find your good tool and try it, it really works.

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