During my time working in the hospitality industry, I encountered a wealthy family whose young daughter had just lost a tooth. Trying to engage her, I asked if she was expecting a shiny coin from the tooth fairy. Her mother responded that money wasn’t important to them; instead, the tooth fairy would bring nail polish or a small toy. This interaction made me realize that the girl probably had no understanding of money. It seemed like she didn’t receive an allowance, and the family’s wealth meant that all her needs and wants were effortlessly catered to. She was a sweet kid, not spoiled, but I wondered about her financial education.

Her parents were expats enjoying a luxurious lifestyle in Guatemala, with bodyguards, maids, and babysitters available around the clock. The girl attended an expensive private school and would likely go to an Ivy League college in the future. I questioned how she would handle financial responsibilities like rent, food, and entertainment without any prior knowledge of managing money.

I also met a 25-year-old who wasn’t allowed to carry cash. His father provided him with a credit card and monitored every expense. This system prevented him from understanding the true cost and value of things, as swiping a card is vastly different from earning money and paying bills.

Whether one is a wealthy trust-fund child or a middle-class kid without an allowance due to financial constraints, the lack of financial education in childhood can lead to serious difficulties in managing money as an adult.

Why aren’t parents teaching their kids about money? Sometimes, it’s because they themselves struggle with finances and feel ashamed or guilty. In other cases, wealth leads parents to ignore the importance of money education, depriving children of learning the value of hard work and delayed gratification. Some parents assume schools will teach these life skills, but financial education is often neglected in the curriculum. Just like with sexual education, expecting schools to cover financial literacy without parental guidance is unrealistic.

So, what can parents do? The key is to prepare children for real life, starting with early money management lessons. Here are some practical steps:

1. Introduce Money Early: Teach kids to count money through simple games like playing shopkeeper. Give them an allowance to learn spending and saving.
2. Age-Appropriate Tasks: Take them grocery shopping to compare prices, calculate recipes, or save up for something they want.
3. Encourage Entrepreneurship: Support their business ideas, whether it’s creating an app or teaching a skill. Allow them to explore different ways to earn money.
4. Set Rules: Gradually shift financial responsibilities to them as they grow. For example, my parents talked about me living on my own from a young age. By 17, I was managing my own expenses and paid for my college education, with the assurance that they would help if necessary.
5. Communicate: Be transparent about financial situations. If money is tight, explain why. If you splurge on something luxurious but deny them small expenses, provide context. Clear communication helps them understand financial decisions.

By implementing these practices, parents can better equip their children to handle money responsibly, preparing them for independence and financial success in the future.