Managing money is a life-long skill, and unfortunately, it’s not prioritized within our public education system.

According to a recent MarketWatch report, only 57% of U.S. adults are financially literate. What’s even more shocking is that more than three-quarters of Baby Boomers and the Silent Generation know of 401(k)s but don’t use them. As for the youngest generation to enter the workforce, more than half of the Gen Z population is unfamiliar with Roth IRAs.

Financial literacy not only provides us with the tools to become financially independent, it also allows us to be smarter with our money to avoid making costly mistakes. A report from the Financial Educators Council found Americans lost an average of $1,506 in 2023 simply because they lacked financial knowledge.

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However, in honor of Father’s Day today, let’s discuss how parents, fathers in particular, can change things by exposing their children to money management early and continuing to guide them as they grow into adulthood.

The key to financial literacy is to teach our children about money when they’re young. Here are five ways to do that:

1. Give your children an allowance.

Start by giving your kids an allowance for completing chores around the home. This can include walking or feeding the dog, cleaning their room and helping with dishes. Giving your child an allowance in exchange for the work they’re doing around the home will teach them the value of money, responsibility and a strong work ethic.

It will also allow them to start building personal savings, which can be used to purchase something they want. Children tend to make different choices when spending their own money.

Creating an environment where they can earn and spend their own money will allow them to succeed and fail under your care. And learning these lessons early on will stick with them as they get older.

2. Teach your children how to budget.

Another life-long skill is learning how to create a budget and stick to it. Whether your child is earning a weekly allowance or working their first part-time job, sit down with them and create a budget.

This works especially well for older kids. Consider making them pay for a portion of their cellphone bill or car insurance and list those expenses in their budget.

If they’re unable to make those payments, consider implementing real-life consequences, such as limiting or temporarily taking away phone and driving privileges.

Another alternative is to loan them the money they’re short on and require them to pay you back.

While it may sound harsh, this will help them understand the importance of living within their means and the consequences of not being able to pay their bills.

3. Involve your children in filing taxes.

The process of filing taxes is a big area of concern for many Americans. A Trustpilot survey found 13% of respondents are not confident about filing their taxes. Eight percent said they don’t know where to find the resources to file correctly.

That concern is even more prevalent for younger generations. A NerdWallet report found 92% of Gen Zers say they’re fearful about filing their taxes incorrectly, with 20% saying they’re concerned about facing criminal charges for filing incorrectly.

There’s a lot of anxiety surrounding this annual process, but involving your children early on can help alleviate some of that stress. If you file your taxes yourself, invite your children to sit with you and watch. Show them the different forms and what they mean. If a tax preparer files your returns, consider taking your child to the appointment with you.

If your child is old enough to receive their own returns, encourage them to file on their own with your guidance. Familiarizing them with filing taxes will make it easier for them once they’re out on their own.

4. Introduce your children to investing.

Learning how to invest can sound scary — especially for those who are just starting to develop their portfolio — but it’s an essential component of building financial stability. When it comes to investing, it’s important to let your children know there’s no one-size-fits-all method. Once they get to a level where they’re able to start investing, help them identify and establish clear financial goals. This will help them decide what investments to make.

You’ll also want to help them identify their risk level. They need to know that all investments come with risk — it’s just a matter of how much risk they’re comfortable taking.

From there, you can help them determine how much they can afford to invest, ensuring they factor it into their budget.

5. Emphasize the importance of saving for retirement.

This is also a great time to talk about saving for retirement. If your child has an employer-sponsored 401(k) plan, review it with them and encourage them to max out their contributions. It’s truly surprising how much that money can grow over time.

If you want to take it a step further, encourage them to open an IRA. Emphasize that the contributions don’t have to be huge. In fact, it’s smart to start small. As they continue to grow their income, they can adjust their contributions accordingly. The point is to start saving for retirement as soon as possible.

Teaching your children how to be fiscally responsible is one of the most important lessons you can teach them. It will allow them to have a healthy relationship with money, fostering good spending and saving habits that will carry them through life. Normalizing discussions around money management will also allow them to see that it’s OK, and encourages them, to seek guidance when needed — especially at a time when many Americans are struggling to achieve financial stability.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.