Teach Children About Money

I read this article and would like to share with all of you. I personally believe that Financial Planning should start young. Whenever I read the newspapers about the young adult asking parent for money or get into huge debt via their credit cards, ready credit, etc., my heart sink. However, it is never too late to know and to educate our children about the importance and value of money. The concept of Financial Planning should be shared with the young even during childhood so that they have the habit of saving and spending wisely. This applies to all regardless how much they earn when they grow up. You may have read that even professional is short of money, so everyone has to be money wise.

Want to Teach Children About Money?

By Ric EdelmanFrom Inside Personal Finance

I have bad news and worse news. The bad news is that thousands of high school seniors recently flunked a test on personal finance, with an average score of just 50%; only 4% of the students passed. The worse news – yeah, it gets worse – is that these scores are actually lower than they were six years ago. That’s right: In the 1997 study, seniors scored 57%, and they scored 52% in 2000 and in 2004. The tests were administered nationwide by the Jump$tart Coalition for Personal Financial Literacy. To learn more about this, I visited with Dara Duguay:

Ric: Dara, what on earth is going on?
Dara: Ric, this year’s results were horrible, and the scores are getting progressively worse. The problem is that only 15% of the students in our survey reported learning anything about personal finance in school. That means the number one teacher is the parent. But in many cases, the parent doesn’t know how to teach about money. Thus, we often find the blind leading the blind.

Ric: The obvious answer is for parents and teachers to become more involved, but as you said, they often know little about personal finance themselves. So, what can they do to learn how to teach money to kids?
Dara: We encourage parents to go to our web site: http://www.jumpstartcoalition.org/, where they will find hundreds of curriculum resources for children in kindergarten through grade 12. Most of the materials are free.

Ric: Kindergarten? How young is too young to start?
Dara: I tell parents to start teaching kids about money as soon as they start asking for it. Our web site offers several dozen types of learning materials for children in kindergarten, 1st and 2nd grades. You can start teaching very young children, and the younger the better.

Ric: You mentioned that only 15% of students report that they’re learning anything about finance in the school. It’s bad enough that most schools don’t teach this subject, but it’s unconscionable that some that once did, have stopped. Tell me about the situation in Illinois.
Dara: Illinois has been our shining example for many years. High school seniors there must take a personal finance test during their senior year. If they fail it, they are required to take an entire semester of consumer education. Most Illinois students do fail it, so they enroll in this class in their last semester. Illinois’ approach has been very different from most states. Usually, there is no separate discipline called personal finance, so if money management is taught at all in school, it has to be linked with another discipline. For instance, it can be part of a family consumer science class. Or it can become a component in a business class. Unfortunately, in most states, family consumer science and business classes are electives. Because personal finance is not required, only a small percentage of students actually take these electives.

Ric: So Illinois has shown us a great way it can be done.
Dara: Yes. However, because of the “back to the basics” movement that focuses on reading, writing, and arithmetic, Illinois is considering dumping all of the tests that are not central to what they perceive as their basic mission. If implemented, that thrust would include getting rid of the personal finance test, meaning students in Illinois will no longer be required to take this consumer education class.

Ric: So how can we counter this back-to-basics movement?
Dara: We need to figure out how we can include personal finance in some of the basic core courses. For example, Federal Reserve Chairman Alan Greenspan and Treasury Secretary Paul O’Neill have talked about integrating personal finance into math classes. This makes sense: If you’re going to teach addition and subtraction, why not teach it in the context of balancing a checkbook? If you’re going to teach multiplication, we can teach it in the context of compound interest calculations. We need to see where we can integrate personal finance into main stream courses. For example, Iowa students use my book, Please Send Money, Financial Survival Guide for Young Adults, in English classes.

Ric: Well, they have to read something, so why not read about a girl named Mary, who gets herself into credit card debt, and who learns what to do about it!
Dara: Yes, we need to start thinking creatively about ways to incorporate personal finance into the core subjects.

Ric: In one sense, the situation today is very different from 20 years ago. Back when I started in the personal finance field, there was little information available to teach people about money — adults as well as children. But today, there is a huge wealth of information readily available, and the Jump$tart Coalition is an outstanding source for such information. So the problem is no longer lack of information. Instead, the problem is access to that information.
I’m talking about the gatekeepers. They exist in every field, and here, the two primary gatekeepers are educators and employers. They resist teaching about personal finance partly because they don’t consider it part of their mission, and partly because they have plenty of other obligations that demand their attention. Schools, for example, have perennial budget restraints, as well as too many mandates from the community and government. Employers say it’s not their responsibility to teach employees about money, and besides, laws and regulations sometimes prohibit them from offering finance advice to their workforces. Dara, no wonder you are having trouble getting your materials into the hands of people who need them.
Dara: You’re absolutely right. I think teaching personal finance is not seen as being that important, given all the responsibilities that schools and employers already have. However, if we continue to regard personal finance as something that is supposed to be taught in the home only — and not in school or the workplace — our country will continue to produce poorly trained consumers. Ironically, several studies conducted by Virginia Tech show positive relationships between knowledge about personal finance and job performance. Employees with financial problems don’t perform as well on the job as those who don’t have such troubles. It is easy to understand why; it’s hard to concentrate on work when you’re worried about how you’re going to pay your mortgage or make credit card payments, especially when you are getting calls at work from collection agencies. Studies show that financial education in the workplace actually boosts performance, improves morale, and reduces turnover and absenteeism. If employers want to increase their productivity, they should offer money management courses for their employees. And employees want this education, too.

Ric: So we need to focus on the gatekeepers. How do we convince them that their audiences need and want the information that is now available?
Dara: That is the most frustrating part. However, there is some good news. The U.S. Treasury Department is starting a series of educational roundtables in conjunction with the U. S. Department of Education. We’re hoping to get a lot of the education groups involved who have previously not shown any interest in personal finance education. And I’m hoping that having key government officials talking about the need and the importance of personal finance will help these educators see the importance of financial education and want to get involved.

Ric: Dara, the work Jump$tart is doing on behalf of parents and educators is outstanding, and I encourage my readers who have school-age children in their lives to visit http://www.jumpstartcoalition.org/
updated 11.29.05