The Junior Achievement students at Carl Sandburg Middle School in Mount Vernon are learning the concepts of savings, income, budgeting, investing and the pros and cons of debit and credit. Photo courtesy of Junior Achievement
In an age when paying one’s mortgage can be done from a smartphone, money smarts is an important part of navigating life. From saving to buy the latest video game to learning how to budget an allowance, financial literacy is one of the most important lessons for children, say financial experts.
“It’s very important to teach tweens and teens about money,” said said Steve Pilloff, Ph.D., Associate Professor in the School of Business at George Mason University. “For many kids, this is the first time they are making independent financial decisions, such as whether to save a birthday gift or spend it on a video game. “
In fact, Patti Senft, Manager of Program Engagement at Junior Achievement of Greater Washington in Fairfax, Virginia says that one of her organization’s goals is to teach financial literacy to children. “Junior Achievement has determined that teaching the concepts of savings, income, budgeting, investing and the pros and cons of debit and credit should begin with middle school students in 7th and 8th grade,” she said.
“The knowledge that the students learn through the Junior Achievement gives students the skills they need to manage their expenses and budget wisely for a successful future,” she said.
Helping children set financial goals, delay gratification, earn money and save it toward achieving those goals is one of the first steps that parents can take to teach smart money practices, said Pilloff. “The habits, and even more critically, the decision-making process children develop early on will influence the way they approach financial matters throughout their lives,” he said.
Students should be taught to make choices with the amount of money they have, suggests Senft. “It’s important to teach children to distinguish between what you need versus what you want,” she said. “It’s important to teach children of all ages about money. It’s never too soon to talk about the importance of savings.”
“It’s important because in any modern society, the one thing that people do almost every day is make money decisions, so knowing how to do it well is something that is going to be useful to every single one of us,” added Laura Levine, president and CEO of the Jump$tart Coalition for Personal Financial Literacy. “Knowing how to manage money is something that all consumers need to do, so it’s important that we teach that to our kids.”
In fact, learning to manage a budget is one of the basic skills that Levine encourages parents to teach.
“Years ago, finance was basic, but today there are so many options and financial decisions that have to be made,” she said. “Money is more self-directed than ever before. Finances are more complicated than ever before, so we need skills to manage it.”
When it comes to managing money, one of the best ways to teach is leading by example, says Levine. “Like with anything else, kids learn by what they see at home,” she said. “Even parents who haven’t made the best financial decisions in the past can resolve to do it now in the New Year.”
While some parents might find starting a dialog daunting, it’s vital that parents have those conversations with their children, said Levine.
“Talk to your kids about money,” she said. “It’s important to distinguish between talk and teach. Parents who don’t know about money can freak out when they’re asked to teach their children about money. Instead, talk to them and say, ‘Let’s learn about this together.’”