Media Contact
Rich Batten
Colorado Department of Human Services
Maggie Spain
The Bawmann Group

December 21, 2009

A Penny Saved Is A Penny Learned: How Fathers Can Teach Their Children Financial Literacy

The current condition of the US economy provides an opportunity for today’s youth to learn from the mistakes of the adults around them as they witness more and more Americans falling into financial hardship. This is a trend that will likely continue if younger generations do not learn financial responsibility themselves. According to the Jump$tart Coalition, at least 75 percent of American high school seniors lack the necessary skills to make sound financial decisions. This problem presents a perfect opportunity for fathers to teach their children the art of money management at home. If fathers educate their children on the value of saving, the dangers of easy credit and the importance of a budget, they can set them up to have success later on in life, not debt.

“When children grow up, they will find themselves with real financial responsibilities,” said Rich Batten, fatherhood and family specialist with the Colorado Department of Human Services. “Fathers can be great teachers for these important financial lessons as they have been dealing with bills, credit cards and savings throughout their adult lives. Just by showing their children real world examples of how they manage money, fathers will give their children the skills they need to handle finances smartly and independently.”

While finance is an oftentimes complicated subject, there are a few simple and basic concepts that every child should learn. lists the following five money concepts for fathers to teach their children:

Save for a rainy day. From the time your kids are old enough to want toys, you should teach them how to save for the things they want to buy. An allowance is a good tool for this concept. Your child may want a video game that costs $50, but they get an allowance of only $5 a week. It is then their responsibility to decide between buying candy on a certain day or saving for the more expensive item a couple months down the line. Almost all personal finance boils down to this concept and it's best to learn from experience.

Work hard for your money. Help your child make the connection early in life that money is not something freely given, but earned through work. If you choose to give your children an allowance, tie it to the successful completion of certain jobs throughout the week. Or you may choose to set a market rate for various tasks. You may even encourage them to begin offering their services around the neighborhood.

Understand a budget. A budget is a foreign concept to children, especially younger children who simply do not realize that daddy has a limited amount of money to spend each month. But learning what a budget is, and why it is a good idea, is key to financial literacy. The best way to teach kids how a budget works is to show them. Give them a broad sense of how adults divide up their money each month. You can also encourage your children to start a budget of their own with part of their allowance going to savings and part for fun.

Embrace the power of compound interest. Compound interest simply means that the rate at which your money earns interest increases over time. You can teach your kids about the power of compound interest with a simple exercise. Put a penny on one side of a table to represent an account earning compound interest and a dime on the other side of the table to represent an account earning simple interest. Ask your child which will grow to a dollar in fewer steps: the penny, if you double it at each step, or the dime, if you add an additional ten cents at each step. By the eighth step, the penny will grow to $1.28 while the dime has become only 80 cents. This will help your child learn the importance of giving money the time to grow with compound interest. What starts off as a little bit of interest will, given enough time, become a large amount. The earlier you start saving, the better.

Beware of credit. Credit cards can be valuable tools in a healthy financial lifestyle, but kids need to be taught from an early age that credit cards are not free money. Here you can give age-appropriate lessons in how credit works by simplifying the concepts and acting as your child's bank. If your child wants an item that costs $20, you can extend them credit under terms similar to those for actual credit cards. If you lend your child the money at an interest rate of 20 percent per week and they pay it off in a month, they will have paid $10.13 more for the $20 item, learning firsthand how credit cards work.

In October 2006, the Colorado Department of Human Services, Colorado Works Division was awarded a $10 million federal grant distributed over five years to strengthen father/child relationships and improve parenting. Colorado is one of two locations nationwide, including Washington, D.C., to receive this federal community access grant. The Responsible Fatherhood Initiative distributes more than $1.1 million in community awards to State, community and faith based organizations to assist in providing direct services to fathers and families. Awards of up to $50,000 are distributed per program per fiscal year. For more information on a fatherhood program in your community, please visit