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How to teach your kids about money

  • When it comes to teaching your own children, the secret to success comes down to imparting two life lessons: delayed gratification and autonomy.

In order to teach your children about money, giving them a piggy bank just isn't enough.

In this country, children are coming up empty when it comes to dollars and cents and both schools and parents are a big part of the blame.

About 1 in 5 children in the U.S. don't meet baseline levels for financial literacy proficiency, according to the often-cited PISA 2015 Financial Literacy assessment. Only 10 percent are considered "top performers" capable of analyzing complex financial products and problems.

Not surprisingly, students who are required to take personal finance courses have better average credit scores and lower debt delinquency rates as young adults, according to data from the Financial Industry Regulatory Authority's Investor Education Foundation, which seeks to promote financial literacy.

But where the school classes fall short, parents are left to fill in the gaps.

A separate 2017 Parents, Kids & Money survey by T. Rowe Price found that 64 percent of parents who discuss financial topics with their children at least once a week are more likely to have kids who say they are smart about money.

Two life lessons

When it comes to teaching your own children, the secret to success comes down to imparting two life lessons, according to Adrienne Penta, co-founder and executive director of the Center for Women & Wealth at Brown Brothers Harriman: delayed gratification and autonomy.

Teaching kids to strengthen their willpower and giving them age-appropriate independence when it comes to saving and spending will provide a foundation that allows them to grow into responsible, successful adults, she said.

That can range from allowing your kids to decide what to save their money for, or letting them decide what they spend their money on to managing their own accounts.

"Allowance is a good thing," Penta said, but getting a conversation started is the first significant hurdle.

And those talks should include giving back, she said, such as "help putting old clothes in a winter clothing drive."

"There's a lot in the 'know how' about money," she said, but we "also have to make kids understand values."

"On the Money" airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.