A report on financial literacy found that one in five teenagers in the U.S. lack basic fundamentals when it comes to understanding personal finance. As an adjunct professor at Temple University for many years, my personal finance class was one of the first finance courses my students ever had. If my students did take a course in high school, it revolved around a “stock-market” game, which I find to be more like gambling and doesn’t really teach good money habits, like saving, spending, and financial priorities.
Since we lack financial literacy in schools, this leaves you, the parent, to teach your children. From my experience, it’s important to develop good money habits when your children are young. Here are a few things to consider to help teach your children now about financial literacy. The good news is, it can be straightforward and simple, you don’t need to be a financial advisor. Plus, it can even be a fun learning experience and a way to bond with your children.
- Encourage your children to work a summer job. This past summer, my three teenagers got jobs. I encouraged my children to start young, to learn the value of working hard. Help your children find a job that’s a good fit for them.
- Teach your children the value of a paycheck. Before my kids got their first paycheck, we had a family meeting. I showed them how to open a bank account and what it means to save and put money away. I encouraged them to adopt the “save half, spend half” method.
- Map out a budget. My one son wanted to work to buy an electric bike. I showed him what his spending would look like over the summer, and how he would be on a tight budget in order to make the big purchase.
- Teach them about priorities. When I asked my son what the purchase meant to him, and he told me it was to help him get around easier and avoid relying on catching rides to the bus stop when the school year started. I challenged his reasoning. I told him a priority is to pay his sister back for the money she loaned him last year. Which, he assured me he would do before his purchase.
- Don’t fix your children’s mistakes. By the end of the summer, the electric bike was broken. As a parent, it’s hard to refrain from fixing your children’s mistakes, but fixing them won’t help them learn the hard lessons necessary to succeed in life.
If your children learn the value of hard work and understand budgeting, spending, and how to save, it should set them up for a better financial future. At the same time, teaching your children about financial literacy doesn’t mean we should show them our paychecks or bank accounts. I believe that conversation should happen at a later date when your children are grown adults and settled. On the next installment of this blog, you will learn tactics and ways to have this critical conversation.