MoneyWatch: May 2008

Children and Financial Literacy

Part of raising a child is preparing them for life on their own.  In a financially complex world, it is essential for a child to acquire a general knowledge about money and how to manage it.  Despite its crucial nature, teaching children about financial topics is often viewed by parents as awkward, time consuming, or difficult.  In reality, there are many easy and convenient ways to provide children with the necessary skills that will enable them to make good financial decisions throughout their lifetime.  Here are some suggestions from an article entitled “Teaching Children the Financial Facts of Life” by the Federal Deposit Insurance Corporation (FDIC).

Teach by example – children learn indirectly through observation and example
Be conscious of what your actions convey to your children
You must be financially responsible if you want your child to behave that way as well

Involve them in routine tasks – Look for teachable moments
Have them clip coupons, fill out deposit slips, compare prices while shopping, create a vacation budget, etc

Give an allowance – Use as a teaching tool, not a giveaway.
A fixed amount of money each week or month will force them to make choices about how to use their money
Attach responsibilities to the allowance to instill the idea that you have to work to make money

Let them make mistakes
If they make the wrong choices on how to spend their money, they will learn from the consequences and make the correct choices later
Don’t bail them out with extra cash if they mismanage their money

Promote but don’t force savings and charity – guide rather than dictate
Experts say it is counterproductive to require a child to save a part of their allowance.  They learn the best by making their own choices
Promote saving by opening up a savings or investment account for them.
Help them find an organization to donate to and inform them about the benefits of charity

Discuss household finances and family goals
Inform them of how you make decisions regarding spending, budgeting, and saving
Involve them in discussions about the family’s financial goals

Make learning about money fun and interesting
Play board games that involve money such as Monopoly
Use computer and internet games that teach financial and math skills (Some links are provided below).

Click on these links for more tips and resources.

Local Resources

KeyBank: Raising Financially Savvy Kids
Chase: Teaching Children about Saving
Cuyahoga County Treasurer: Tips for Teaching Children About Money

National Resources

FDIC: Teaching Children the Financial Facts of Life
Family Education: Various Articles on Teaching Children Financial Skills
University of Minnesota: Teaching Children Money Habits for Life
Schwab MoneyWise: Information and Resources for Parents and Students
Jumpstart Coalition: Clearinghouse for Financial Literacy Resources
FDIC Money Smart: Free Educational Programs for Ages 12-20
Tips For Kids: Free Educational Programs for Kids and Students
Girl Scouts Money Smarts: Financial Tips Tailored to Girls
Moneyopolis: Money Games for Kids
OrangeKids: Interactive Learning for Kids

Support for MoneyWatch is made possible by Charter One Foundation.

Research assistance for MoneyWatch is from Cleveland State University Nance College of Business Administration.