Many parents have found out the hard way that their children never learned about finances in grade school, high school, or even college. While some schools do offer some level of instruction on money, it’s never a safe assumption that the schools will teach your children financial literacy at a level that will truly prepare them to be responsible financial stewards. This is not because teachers don’t believe it is important. In fact a 2011 Charles Schwab survey revealed that nearly 90% of teachers felt that all high school students should pass a test or take a required course on finances. However, few states make financial literacy proficiency a requirement.
So, whose job is it to teach financial literacy anyway? Some might argue that this is a parent’s responsibility. The time to start is actually even before kids start to school. Many experts recommend you start as early as age 2 or 3, when kids are old enough to count. However, few parents feel they are prepared or even qualified to pass these lessons on to their children. As parents, we don’t always have the answers, no matter how badly we wish we did. The reality is that in order to ensure that every child has access to financial education; it needs to become part of required curriculum. Students are required to learn subjects and skills such as match and reading because they are critical for daily success. Knowing how to manage money is an essential life skill as well. Most of us make choices about money on a daily basis…for some it is as often as several times a day. Even young teens tell us they are already experiencing this in their lives.
Most people agree that ages 8 to 14 are the key time frames for children to comprehend and begin practicing the basics of money management. Certainly by this time there are many activities and resources that can be used by every parent to help teach financial literacy:
- Start with money allowance and the piggybank. From the very beginning, when you give your child an allowance for chores or miscellaneous activities, make sure they understand that a portion of this should be put in the piggybank for emergencies, charity and special purchases. Teaching them to save for later will serve them well all their life.
- Make money management fun through games. Make the learning process fun using tools, like our award winning ThriveTime, board game or create your own home made games that encourage learning. You can create games around money they may need on a family vacation. Your children should be able to have fun and learn some valuable money management skills at the same time.
- Use the dinner table as a risk-free forum for discussing financial basics. You don’t have to disclose all your personal challenges, but kids need to know some specifics about home mortgages, buying-versus-renting, food and electricity costs, credit cards, and planning for a college education. Consider having them help pay your bills each month so they start to understand the cost of everyday living.
- Migrate the piggybank to a savings account. This is an opportunity for a joint trip to a bank or savings institution, to give them an understanding and real experience in dealing with money as a virtual as well as a physical entity. Plus, it introduces the concept of keeping records, and reviewing statements on a regular basis.
- Have them help make decisions on daily spending activities. It’s never too early to have your child understand the price differences in the grocery store between large and small cans, and premium brands versus generic. Later they can help estimate the cost differences between various restaurants, or eating at home versus eating out.
- Integrate budgeting into their activities. Have them look ahead at things they want, such as a bicycle or special clothes for school, and have them plan to earn or set aside amounts each week in preparation. Kids will follow your example, so demonstrate the process you follow for a special family vacation or new car purchase.
- Introduce and nurture entrepreneurial activities. There is nothing like the old standby lemonade stand, paper delivery, or lawn service business to teach the concepts of money management. Don’t forget the well-accepted investor axiom that entrepreneurs learn more from failure than from success. It’s easy to learn entitlement, and hard to unlearn it. Our YOUTHpreneur BIZKit was designed to help you support your children in their entrepreneurial endeavors.
- Actively seek out summer programs and educational programs. While many schools are short on formal money management curriculums, there are often special activities and programs available for teens, or mentorship boot camps available through sponsors and volunteer organizations outside the formal educational system. Be proactive in finding these.
Once your children leave home for college, or make their first attempt to live alone, it may be too late to look for formal education processes on financial literacy. The “school of hard knocks” takes over, and is a harsh teacher, as learning comes with potentially painful consequences.
Financial security for tomorrow for your kids starts today, with you teaching them financial literacy at a youngest possible age. To ensure that every student receives financial literacy education that will be critical for their long term success, please join me and my team as we continue to push for proficiency requirements in formal education. In Arizona we are starting with support of SB1449, which will provide us a positive step in this direction. If you are an Arizona resident, you can voice your support as well by contacting your local Representative and asking them to vote in favor of SB1449. Learn more about SB1449 here.
If your children or loved ones are old enough to spend money, they are old enough to understand the responsibilities of doing it right. Believe me, the joy and satisfaction of seeing them do it right is far better than the pain of watching them learn the hard way, for all concerned.
To Your Success,