By Susan Sachs Lipman
April is Financial Literacy Month and there’s no time like the present to give your kids some lessons that they can use for their entire lives. This is especially urgent, given some recent alarming statistics about financial literacy that include high rates of student and credit card debt and low rates of financial education and comprehension. No matter what your child’s age, there are ways parents can teach financial literacy at home:
Preschool
Introduce preschoolers to money when they are learning to count. Use real coins so they get a tactile experience of the different types and values (as always, be aware of choking hazards). Lots of preschoolers like to role-play real situations, so why not encourage them to play store? Take turns buying and selling play or pretend items. Older children can even create “price lists” or “receipts”. This reinforces the notion that money is exchanged for goods, in a fun and approachable way. Talk about prices when you’re at the grocery store, too. Let your children know when you need to choose between two items, based on price and affordability.
Elementary School
Encourage your child to begin saving from any money received using a dedicated jar or piggy bank. Count the money with him or her after a period of time to illustrate how much was saved. If you’re saving for something big yourself, mention that to your child as a way of modeling saving behavior. This is also a good time to introduce the idea of delayed gratification as it pertains to spending. Discuss the difference between wants and needs and ask your child if an item they want is something they need now, or something that can be purchased later (and then perhaps encourage them to save their money to pay for it.)
Some children also begin receiving an allowance at this time. This article by Marketwatch does a very good job of outlining the pros and cons of allowances for kids. In general, the experts who are cited recommend that children have some regular chores they are not expected to be paid for, but perform as part of their role as household members. Some also recommend an allowance as a way to help kids better understand income and savings, and perhaps also income as a reward for work. They also note that whether parents offer an allowance or not, the important lessons are learned when parents talk to their kids about money.
Middle School
Now’s the time to introduce more complex financial topics. Consider having your child open a bank account and have them talk to the banker to hear first-hand about interest rates and minimum requirements. Include your child in family budgeting discussions to further their ability to make wise financial decisions. Make a grocery or other relevant budget as a family and keep a chart so family members can watch and participate in the progress.
Introduce concepts related to investments, such as rudimentary examples of how the stock market works. Some kids like to “pretend invest” in companies they choose. Help them check stock prices to see how their investment would have done over a period of time, perhaps over a summer. See this link to learn how the stock market works.
High School
While high schoolers don’t generally need credit cards yet, they should begin to understand how credit and debt work and be introduced to the concept of high interest rates associated with carrying debt. Educate your child about their (future) credit score. Talk about the very good reasons one might incur debt, such as taking out student, home or car loans.
If your child is nearing college age, involve him or her in discussions about college costs. Perhaps open a checking account, if you haven’t already, and teach them how to write a check. You may want them to have a debit card and increased responsibility for their own finances. While kids often have a full load of activities, the ones who are able to also make time for a part-time and/ or summer job not only earn money and terrific real-world experience, but get a serious leg up on other kids as far as financial literacy and responsible earning and spending. Is your child headed to college? Along with dorm bedding, give them some guidelines about which expenses they will be expected to pay.
Taking these steps now will help ensure that your child grows up to be financially savvy and responsible.
Learn more:
8 Scary Financial Statistics—and How to Avoid Being One
Youth.Gov Facts about Financial Knowledge (more resources below article)
Seeking resources to help your child thrive? Attend a workshop, schedule a parent education meeting, or schedule an assessment with one of the Child and Adolescent Specialists at Parents Place.
Susan Sachs Lipman (Suz) is the author of Fed Up with Frenzy: Slow Parenting in a Fast-Moving World, which contains 300+ activities for family fun and grew out of her blog, Slow Family Online. Slow Parenting and the book were named a 2012 Top 10 Parenting Trend by TIME Magazine. Suz has written for the New York Times’ Motherlode blog, the Christian Science Monitor’s Modern Parenthood blog, and many others. She manages social media for Parents Place.