Raising financially literate and confident children

Julie Caperton
Head of The Private Bank and Wells Fargo Partnerships

In chatting with a colleague about her young children recently, we laughed as she described her 5-year-old’s belief that he could go to the bank and would be freely given as much money as he wanted to buy toys.

It made me think of all the conversations about finances I’ve had over the years with my own children, who have reached young adulthood now. I’m a firm believer in having open and honest conversations about money with my children; however, I often worried they weren’t interested in having those talks. But recent research suggests that young people today actually crave financial education.

The Wells Fargo Money Study¹ examined attitudes about money held by American adults and teens. The survey included people from a variety of financial backgrounds, and I found the perspectives of young people to be particularly striking.

The study found that 83% of teens wish they knew more about better managing their money, and nearly all (91%) said they want to learn new ways of thinking about money and dealing with their money.

Their need — and desire — for financial education is apparent. I recommend that all parents start having discussions about finances when children are young and progressively building on those talks over time. No matter your children’s age, there are steps you can take to promote financial literacy, impart your own values, and build up young people’s confidence in their own abilities.

Budgeting and saving

This could begin as simply as giving a young child a piggy bank. I especially like the ones that are split into sections for spending, saving, and giving. When they express an interest in a particular purchase — whether it’s a toy, a gaming system, or a car — challenge them to save a specific percentage of the price and suggest opportunities to help them earn enough money to reach that amount. This helps kids learn how hard work and decisions about their spending habits affect long-term goals.

Basic investing

Your first instinct may be to delay conversations about investing until your children are older, but consider the possibility of setting aside a modest amount of money for a family investing project. You and your children can decide together how to invest, watch how the funds grow or diminish, and discuss what steps to take next. Head of Family Wealth & Culture Services Stephanie Duignan of Wells Fargo Advice & Planning said she once worked with a family that had each of their college-aged kids manage a $15,000 investment account with the goal of not losing any principal. The kids could ask questions of the family’s advisor, and the parents took a hands-off approach, only offering guidance if requested. I love the idea of issuing a challenge and empowering young people to make their own decisions.

Building credit

A young adult may believe that being financially responsible means avoiding debt altogether, but what happens when they’re ready to buy a home and they have little to no established credit? Good credit is critical for loans and even for potential employers, who sometimes assess credit as an indication of responsibility. It may be helpful to explain credit as a tool. Once your children understand investing, help them make the link between credit and investments and how they could potentially borrow against investments for a major purchase. Credit can be productive or unproductive, so it’s important that young adults understand when they can make credit work in their favor.

Protecting themselves financially

As soon as children become old enough to use the internet, it’s a good idea to start educating them about online safety — not just for their personal safety but also for their financial safety. Young adults often rely heavily on online financial services, which means they need to be extra vigilant for scams. In fact, 20-somethings are the most likely age group to report losing money to fraud, according to the Federal Trade Commission. Our children need to know that scammers can make calls, texts, and emails look like legitimate financial communications. Teach them to use a healthy level of suspicion.

Raising financially literate children is a years-long process, and your advisor is available to guide you to information and resources along the way. And while this information is critical to children’s future success, these conversations are really about more than just education. It’s about creating open and transparent dialogue to strengthen relationships between you and your children.

1. On behalf of Wells Fargo, Versta Research conducted a national survey of 3,403 U.S. adults and 203 U.S. teens age 14 to 17. Sampling was stratified and data were weighted by age, gender, race, ethnicity, income, and education to achieve accurate representation of the current population based on estimates from the U.S. Census Bureau. The survey was conducted from September 5 to October 3, 2023. Most findings are reported based on the full sample of adults. Comparisons and data from teens are noted separately.