The power of the piggy bank: Five ways parents can teach their kids financial literacy

Research led by the Brown School’s Michal Grinstein-Weiss finds direct connection between parental teaching of money management and children’s financial outcomes

Financial literacy for kids_primary2Financial literacy is more important than ever. In the last five years, words such as loan default, foreclosure and recession have become as common as savings, bank statements and assets.

Washington University in St. Louis researcher Michal Grinstein-Weiss, PhD, associate professor of social work at the Brown School and associate director of the Center for Social Development, is lead author on a paper that studies loan activity in low- and moderate-income (LMI) homeowners.

The study, published Jan. 7 in Social Work Research, finds that higher levels of parental financial teaching in childhood are associated with better mortgage loan performance — including lower levels of delinquencies and foreclosures for LMI borrowers in adulthood.

It confirms that financial literacy begins at home.


“Nearly all parents agree that making sure children are financially literate is an important task — yet one that they may feel ill-equipped to carry out,” Grinstein-Weiss says. “But parents don’t need special knowledge or skills to prepare their kids for financial success. Routine family life is rich with opportunities to teach them the ins and outs of money matters.”

Grinstein-Weiss offers five ways parents can teach their kids financial literacy:

  • Discuss and explain basic finances around the dinner table, especially the difference between needs and wants. “Parents can and should have this discussion even if you are not saving enough or are deeply in debt — just cover the basics and don’t scare your kids,” she says. “New topics can be introduced as kids mature or the family situation changes. For example, house hunting is a natural time to discuss mortgages, interest rates and buying-versus-renting.”
  • Teach kids how to save and set short-term goals (a new toy) and long-term goals (college). “Kids follow by example, so model this behavior with a grown-up piggy bank on the kitchen counter labeled with a goal, such as ‘family vacation,’ and save your pocket change each day.”
  • Open a savings account for your child as early as possible. “Take a parent-child field trip to a bank or credit union and open an account for your child. Even if you’re used to online banking, visit the bank each month with your child to make a deposit as actions reinforce behaviors,” she says. “Review monthly online statements together.”
  • Teach kids budgeting and money-management skills. “Look at the calendar or newspaper for upcoming events that your child is likely to want to attend and needs to start saving for,” she says. “Help them research prices and figure out the time it will take to reach their goal by saving different amounts each week. Pizza night? While munching on a slice, help your child figure out the cost of each serving, adding in all costs, such as delivery, tip, or cost of gas.”
  • Get kids involved in daily activities and decisions about spending. “Take them grocery shopping and have them compare prices of different brands,” she says. “In a long line at checkout? Let older children estimate purchase cost, count out the cash, and complete the sale with the clerk. And show them how you pay monthly utilities, balance the check book, and conduct Internet banking.”