Teaching Kids About Money
Try this quick parenting quiz.
My kids are going to learn about money:
*When they grow up.
If you answered that your kids will learn their financial skills at home, you're right.
While financial literacy is part of school programs, teachers are under pressure to cover many subjects, leaving them "crunched for time, and one result is a serious gap in our curriculum," according to Erin Scheithe with the North Carolina Bankers Association in Raleigh. As kids work their way through the system, the results become painfully obvious: North Carolina high school students fall below the national average in financial literacy testing.
So if the financial skills buck stops with you as a parent, how - and when - do you start teaching your kids about money? How about right now? Kids can process surprisingly complex information about budgets, money and even the stock market. And there are plenty of local resources to help.
Talk about money
It starts with a conversation. "Finances are a taboo subject in many families," Scheithe explains. But talking about family budgets and limitations are one of the best ways to start even very young children on the path to understanding the world of money.
Catherine Kiefer, Charlotte mom of two, puts this into practice with her boys, both younger than 7. "We speak about family finances in a general sense and in a positive way in front of the kids," she explains.
Scheithe suggests incorporating teachable moments into everyday conversations. "Grocery trips present a perfect opportunity to teach the difference between needs and wants, one of the most basic financial literacy concepts," she says.
Teach wise spending skills
Also venture beyond the grocery store to find ways to present meaningful choices to your kids. This might include a trip to the toy store where, according to Scheithe, "you can explain why they can't have an American Doll or the latest Nintendo game."
"Financial management is one of the most important skills you'll learn as a grown-up," says Sara Thompson of LifeWithBills.com in Mooresville. Frustrated by what they viewed as a frightening lack of basic financial skills among young adults, she and co-founder Samantha Edwards created LifeWithBills.com, a site that allows kids to simulate real-life situations including credit cards, bank fees and taxes.
For the younger set, Scheithe recommends Moneypalooza, the newest exhibit at the Marbles Kids Museum in Raleigh, designed for grades K-3. Teacher input was used extensively during the design phase, Scheithe says, and feedback on the finished product is that it "hits the sweet spot of basic economic concepts and fun."
Read more about Moneypalooza under Monthly Calendar Highlights.
Children and charitable giving
While children are learning about spending, teach them how to share. When it comes to charitable giving, the best way to your child's heart might be through his hands.
Elizabeth Jordan, mom of two, places a high priority on community service. Founder of the Raleigh-based KidsConnectNC.org, she works to find ways for parents with young children to volunteer as a family.
Jordan's oldest child, Jack, is now 5 and has been on board with his mom delivering Meals on Wheels since before he could walk. Now that he receives an allowance of his own for small household chores, Jordan sees a strong link between Jack's hands-on volunteer experience and the financial choices he makes.
"Jack looked at his allowance and asked if he could give it to the people we take lunches to," she explains. "Giving is so much more meaningful for him. It would have been a vague concept otherwise."
Saving and investing lessons for children
Once your child is ready to graduate from a piggy bank to a savings account, many local banks offer accounts designed for children. Kiefer's son started with a savings account, then migrated to a mutual fund. That switch has given her the opportunity to introduce new concepts.
"It's fun to talk about this with the kids," she says. "How the account will fluctuate, and how it's a little riskier than a savings account."
If you're not quite ready to open up a brokerage account for junior, the next best thing might be The Stock Market Game, sponsored by the North Carolina Council on Economic Education (www.nccee.org). Director Sandy Wheat says that while the game is most commonly used in groups, with teachers as advisors, parents can register children individually as well.
The game, where students manage a mock $100,000 portfolio, is generally recommended for fourth grade and up. Support materials are available for teachers advising student teams, including a "Math Behind The Market" guide that provides support for the graphing, word problems, trending and algebraic concepts that come into play.
In a two-year study released in July 2009, students playing the game "showed an improved grasp of financial literacy skills, as expected," Wheat says. "But we also found that in grades 4 through 7, math scores improved by the equivalency of nearly a full school year by the end of the 10-week simulation."
The N.C. Council on Economic Education recently announced a $10,000 grant from Fidelity Investments to engage approximately 3,000 eighth-grade students statewide in the game this spring.
Get started now!
The most important thing in helping your kids learn positive lessons about money is getting started. "These are complex concepts," Wheat says, "but kids catch on quickly." She adds, "We think it's important for kids to understand the concepts of banking, how to balance their checkbook, etc. But they also need to understand the economic concepts that go into those decisions. Concepts like scarcity, for instance - that resources are limited."
Andrew Brod, economist and director of the Center for Business and Economic Research at UNC Greensboro's Bryan School of Business and Economics, agrees. "There are two main lessons to teach children about money: scarcity and saving," he says. "The most important lessons are the simplest. We can't have everything we want and therefore we have to make - and be OK with - our choices."
Kimberly Paulk is a freelance writer and mom living in Charlotte.
Paying Allowance: Do it the right way
Paying an allowance is a personal choice. However, if you decide an allowance works for your family, there are ways to help make the most of the process.
Tie allowance to chores.
"The first stage of the financial process is earning money," says Erin Scheithe of the North Carolina Bankers Association. "That's why allowances can be so important." She recommends tying allowance to chores to show your child the connection between work and earnings.
Use it as a teaching opportunity.
Catherine Kiefer, Charlotte mom of two, uses her son's allowance and savings to launch conversations about math, charitable giving and responsibility. She can see their conversations take effect when, for instance, her son asked to add washing the family cars to his chores.
Kiefer says paying allowance has worked well for her family. "Blake is thankful for what he has.... He continues to analyze all of his spending and savings decisions even more carefully than before because he knows that earning money is hard work."
If someone asks how much he's managed to save, Blake says he would respond, "I guess I would say I have a pretty good start."
"It's important for kids to handle money and learn what it is at a young age," says Sara Thompson at LifeWithBills.com. "Managing money is not an inherited trait. If it's not taught, then you're building on a very shaky foundation."