The Importance of Teaching Kids About Money
By Marc Courtiol
These days, too many people do not learn about money and finance until it is far too late. Americans now hold more debt than ever before, and this is at least in part due to the fact that many of us have had no financial education. Sadly, this has led to millions of cases in which individuals do not begin to get serious about their finances until they are in their 30s or 40s and already thousands of dollars in the hole.
The solution is obvious: give kids a thorough financial education, starting as early as possible and continuing until they are out on their own. Parents cannot rely upon schools to give their kids financial education, as most young people never learn about economics or finance until they are in college, if at all. Schools are not getting the job done, so it is up to parents to pick up the slack.
Early stages of financial education
Many parents’ instinct is to shield their children from financial matters. After all, childhood is the only time in life when people do not have to worry about money, and we may feel that not talking to our kids about money is a way to preserve their innocence a little longer. While this may be true, we can still give kids a sound financial education without exposing them to the stress and pressures that adults associate with money.
The earliest step is to begin teaching kids how to count money. In the U.S., this means familiarizing them with the value of pennies, nickels, dimes, quarters, and dollars, and giving them plenty of opportunities to make conversions between different denominations. Most of this involves simple math, so the instruction can begin as soon as children begin learning their basic arithmetic.
Meanwhile, giving kids allowance is a great way to start them off on money management. However, rather than letting kids figure these things out for themselves, it is important for parents to ask questions about how kids spend their money. We do not want to have too heavy a hand when it comes to our kids’ purchases, but we are the parents after all, so we do have the power to tell our children when a certain purchase is not a good idea.
Allowance also gives parents the opportunity to teach kids about longer-term financial management. For example, when a child wants a new bicycle, it may be tempting to go out and buy it for her, but we can actually do the child a much bigger favor by providing her with allowance and encouraging her to save up to buy the bicycle herself. Smart financial practices involve emphasizing the long-term, often at the expense of short-term gain, and the earlier kids gain this perspective the better.
Many parents choose to give allowance with no strings attached, and of course that is their choice, but there is a danger in doing this. Free allowance may send the message that kids are entitled to money for nothing and that parents have an endless supply to give. Although we want our children to be provided for, it may be more helpful in the long term to show them that money is not free. Consider asking your children to perform a manageable list of chores on a weekly basis in exchange for allowance, and do not forget to emphasize that the work must be done well.
Advanced money lessons
Later on, it becomes time for kids to start learning about things like investment and loans. At around the time when the child is old enough to get a part-time summer job (i.e., around age 16), it is time to begin introducing these concepts. Kids need to know that there are more things they can do with their paychecks than just spending the money right away.
Plus, for many older teens higher education may be on the horizon, and you might want to involve them in the financial planning for college. Given the epidemic of student loan debt now plaguing young people in the U.S., it is a good idea to make sure your teenager knows the serious ramifications of taking out loans. Debt is a serious matter, and young people should go through whatever lengths necessary to ensure that they do not begin their post-college life in a deep financial hole.
About the Author: Marc Courtiol is an accomplished health researcher in the field of natural wellness. A graduate from Cornell, Marc is a contributing author for several online journal sites and believes in the many uses of gripe water.