If you’re a parent with one or more children in the pre through middle school, here’s a crucial question — what are you doing to prepare your children to manage their money when you’re not around?
Why Teach It?
By instilling sound personal finance practices at early ages, you’ll help your children handle money wisely as they go off to college and become independent adults. The responsibility for doing this falls mainly to you, the parent, as it is perhaps the most poorly addressed need in today’s K-12 education system.
In a recent national survey, 50% of Americans said they’d experience financial hardship if they had to come up with $1,000 or less for an emergency expense in the next 30 days. The survey’s respondents ranked personal finance as being more important to students than drug and alcohol dangers, healthy eating and exercise habits, and safe driving. Nevertheless, only 21 states currently require the completion of a personal finance course before high school graduation.
What to Teach?
Last April, Linda Matthew of MoneyMindful focused on debt and savings — two incredibly important topics about which even small children can and should learn. And as Linda reveals in her excellent book, Teach Your Children About Money, there are other, similar lessons students can and should acquire before high school begins.
Below are four dollars-and-cents issue sets to begin teaching your children about during their preschool, elementary school, and middle school years. But because you know the most about your family financial circumstances — and those of your children — you should develop your own list of teaching topics.
- Personal Values: What do they need versus do they want? And within those wants, which are they willing to defer versus making an immediate purchase? How much are they willing to devote to what charities that are important to them?
- Planning: How do they set monetary goals, then what should they do and avoid doing to achieve those goals?
- Income: The allowances you give your children will likely be their sole sources of income. Use these allowances to help them understand that incomes are limited, and they aren’t enlarged for frivolous reasons. As your children grow older — probably beyond age 6 — tying all or some of their allowances to chores performed can help prepare them for the world of work.
- Costs and Spending: Different products and services cost different amounts. Competing providers also offer consumers the same products and services for different amounts. Show your children the advantages of comparative shopping and disadvantages of impulse buying; and that, if they make mistakes with their money, the consequences will be theirs to manage.
How to Teach It?
You’re not a classroom teacher, and most children don’t respond well when mom or dad give lectures followed by tests. So how do you go about instructing your children on these topics?
You’ve got something better than any classroom teacher — reality! It generates large numbers of “teachable moments.” But such moments require lots of candor and openness to be effective.
Remember, your children are constantly watching so, like or not, they’re always learning from you. But make sure they get the full story. Don’t hide family finances from them. Help them understand how your values, plans, costs, and incomes drive your financial decisions. As they mature, maybe even involve them in discussions about some of those decisions.
This fall, College Affordability Solutions is publishing on a different aspect of pre-college finance every Wednesday, so become a follower of this website to ensure that you receive the latest of strategies and tactics you can use to generate funds for or cut the costs of college.