Children are unlikely to learn basic financial literacy skills in school because there just isn’t room in the curriculum these days. In fact, less than 20 percent of high school students have the basic skills to balance a checkbook or debit card register, reports the National Center of Education Statistics; and 60 percent of Americans don’t have enough savings to cover a $500 unexpected expense, according to a January Bankrate.com study.
So how do we help our children gain better financial literacy?
Let’s find teachable moments with our kids, nephews, nieces and grandchildren. Talking about money can be uncomfortable, but it’s worth it. Just like learning to ride a bike, basic financial skills are easier to master when you're young. Starting our kids on the path to sound financial practices now greatly increases the odds they will maintain good habits in adulthood.
Where to start?
- If you’re a parent, speak with your spouse or partner so you’re both on the same page on when and how you want to talk to your kids about financial priorities.
- Put yourself in the child’s shoes. Try to remember your top financial worries and priorities at that age. Buying that new app or toy might be the perfect opening to talk about money.
- Ask their thoughts on money. The context will depend on their age, but it shows you're interested in their opinions and makes the conversation more productive.
- There’s no expectation that you explain global economics. Simply relay money-management in the context of what you know. In fact, it’s more meaningful to kids—and easier for you—when you give examples from your own life. And don’t shy away from sharing your fiscal blunders too. You know your kids best, so adjust your approach to suit them.
- Kids learn by doing so bring it up during everyday activities. While shopping, talk about how much you saved buying an item on sale. If you’re planning a major purchase (e.g., car, home or vacation), discuss how grown-ups have to save up for the items they want, too.
- Introduce hands-on learning such the tried-and-true piggy bank. Take it to the next level with an older child by using four jars: saving, spending, donating and investing. The amount of money in the container isn’t important, it’s the process.
- One of the most impactful things you can do may seem trivial: take your child with you to the bank to open her first savings account. Then encourage her to keep making deposits—it’s about creating a habit. And when she wants something she can't quite afford, discuss the value of saving versus borrowing.
- Seek out more ideas and information. There are great financial resources online, including free advice on age-appropriate topics. Try: www.fdic.gov/moneysmart and www.jumpstart.org. You have plenty of time to dial up your knowledge, explaining new concepts as they master the basics.
However you approach the topic, remember to stay focused on the goal: to raise a financially savvy child who can go into the world with the basic knowledge about saving and spending so he/she avoids the temptations of excessive spending.