Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Are your kids smart with money? Probably not! Nearly every survey on the subject shows that most adults -- let alone kids -- can't answer the most basic questions about credit and debt, or saving and investing. This has real world consequences. Here's why financial literacy matters -- and why you, as a parent, need to teach it to your kids.

State of Personal Finance Education

Financial illiteracy permeates our society. Many Americans save nothing each month, and millions more are unprepared for retirement. With 10,000 workers reaching age 65 every day, our nation is facing a retirement crisis of unprecedented magnitude.

If you want your kids to avoid this fate, you must make sure they become financially literate. That means, quite simply, that we must teach them about money while they're young.

Unfortunately, few children are getting the education they need. In 2024, only 35 states require high school students to study personal finance before they receive a diploma, according to the Council for Economic Education, and most employers provide little to no financial education in the workplace.

Teaching Personal Finance to Younger Kids

Children interact with money at a very young age, with three-year-olds choosing cereal at the grocery store. Parents also give their children allowances at a young age, often starting at age six, research shows.

However, many parents don't talk with their kids about money -- and it's often because they simply don't know what to say.

That's what was discovered in a survey of parents. Most (89%) parents of 4- to 8-year-old children feel it's extremely important that their kids grow up with good financial habits, and about as many parents (91%) agree they should be the ones teaching their children these habits.

But half of parents (49%) say they don't know how to discuss money in ways they think their kids would actually understand. As a result, one in four parents never (or almost never) talks to their kids about household finances.

Principles of Financial Literacy

One place to start is with The Squirrel Manifesto, the best-selling children's book that Jean Edelman, my wife, and I wrote in 2018 for 4- to 8-year-olds. It sets the stage for having effective, meaningful conversations with your children, from tots to teens.

Your kids learn both by observing your behavior and through their own experiences. From allowances and birthday money to the cash they'll earn babysitting or mowing lawns, set your children on the path to a lifetime of fiscal responsibility through thoughtful, intentional money habits.

Here are four principles to begin teaching your children financial literacy.

The Bottom Line

By teaching your kids foundational principles of spending and saving at an early age, you can help them form positive financial habits that will last their entire lives.