Modeling and talking about healthy money habits can start earlier than you think.
Financial Literacy is often overlooked as a key component of early childhood education. In fact, it continues to be a gap in many school curriculums, even at the high school and college levels.
The lack of formal education about money results in huge gaps in knowledge which in turn leads to many finding themselves in negative experiences with money in adulthood.
We don’t need to look too far into some recent statistics to recognize the consequences of not having a basic understanding of how money works:
- According to The Federal Reserve’s study completed in July of 2021, the average credit card debt of US families is $6270.
- CNBC reports that just 39% of American households could cover an emergency costing $1000 (https://www.cnbc.com/2021/01/11/just-39percent-of-americans-could-pay-for-a-1000-emergency-expense.html).
- Nearly 40% of American with incomes over $100,000 live paycheck to paycheck (https://www.prnewswire.com/news-releases/nearly-40-percent-of-americans-with-annual-incomes-over-100-000-live-paycheck-to-paycheck-301312281.html)
So, what is Financial Literacy?
According to the Financial Literacy and Education Commission, there are five key components of Financial Literacy:
We need to start teaching our children about money!! By making financial education part of every school curriculum we could set up future generations for financial success. Children as young as Kindergarten age are ready to learn about money. By starting this education early, we then have building blocks from which to take these lessons and expand on them in age appropriate increments.
If you have children, you are one of the primary sources of information they are gleaning abut money. Your kiddos are watching you and listening to you as you navigate your money management. Like sponges absorbing these observations, some of the messaging can be creating lifelong struggles with both the money mindset and behavior in their futures.
Let’s get intentional in serving our children to become good stewards of their money!
Here are some suggestions on age -based money lessons:
Kindergarten: Very young children are capable of analyzing and make choices between two equally positive alternatives without negative consequences. They can grasp concepts around money being exchanged for tangible items.
- Teach them about coins and bills: how to identify and what their value is
- Allow them to pay for items at the store
- Teach them about chores and allowance
- Let them hear you make spending decisions
Age 8-12 years old: children in this age group are capable of managing small amounts of money. They understand the concepts around, spending, saving and giving. It is an age where the concept of budgeting can be introduced and implemented.
- Discuss saving for the future. Help them learn how to wait and save.
- Open a bank account
- Allocate part of their allowance towards savings
- Have them help create your grocery list with a budget
Age 13-15: with their ability to grasp more complicated math concepts, combined with their enhanced understanding of behavior, now is the time to start talking about some deeper topics surrounding financial decisions! Peer pressure is rampant at this age, and talking about how this influences their choices with money will help them to resist some emotional spending!
- Help them create a budget to track income and expenses
- Begin addressing the true cost of car ownership
- Include them in family discussions of wants vs. needs
- Help them learn about credit scores
Ages 16-18: as legal adulthood is around the corner, some further practical knowledge is warranted. Further work on budgeting is key before they begin making choices in lifestyle!
Additionally, getting knowledge about how Student Loans work can help them in making their selection of colleges.
- Discuss ROI of college choices
- Help them learn about investment accounts: IRA’s, 401(k)s, Individual Accounts
- Help them learn some basics of investing: stocks, bonds, mutual funds, ETFs.
- Further their knowledge of a household budget.
- Teach them about credit cards and other loans
Until our school districts embrace Financial Literacy, it is up to you as a parent to guide the practical and emotional lessons about money. I encourage you to help create a generation of financially well -educated and empowered adults.