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SALT LAKE CITY — The perennial lemonade stand — a favorite childhood pastime and a hallmark of a hot summer day — is a sure sign that summer is here. It is just one way enterprising children and teens will work to earn a few extra dollars this season. And whether they are selling lemonade in Dixie cups, doing odd jobs around the house or working at a retail store, summer is a perfect time to teach children important financial lessons that will last a lifetime.
The task of teaching kids to be financially literate, and preparing them to someday be financially independent, is one of the greatest challenges we face as parents. But for reasons not entirely clear, many parents find money- related topics difficult to broach, admitting they are more comfortable talking about bullying, drugs and relationships than family finances or investing, according to the T. Rowe Price "Parents, Kids and Money" survey released in March.
Many parents find money-related topics difficult to broach, admitting they are more comfortable talking about bullying, drugs and relationships than family finances or investing.
–T. Rowe Price
Some adults may feel that because they fall short in their own grasp of finances they are ill-qualified to impart financial lessons to their children. But the truth is, if we can teach children and teens to distinguish between needs and wants, and how to budget and save, they will know more than many adults. If we get it wrong, however, our children are likely to join the millions of Americans who rack up massive credit card debt and get stung each month by stiff interest payments.
Since the recession, 81 percent of teens say they are motivated to learn more about managing their money, according to a Junior Achievement/Allstate Foundation poll. Likewise, children ages eight to 14 are eager to receive financial education, particularly regarding saving and how to make money.
Each spring I get the chance to step out of the office and into the classroom as part of the American Bankers Association's annual National Teach Children to Save Day. Engaging with grade-school students on money-related topics, I am always struck by how receptive they are to relatively advanced concepts such as interest and budgeting.
These children are keen to tackle financial topics, and it is up to us as parents, grandparents, mentors and educators to not only teach them, but to model healthy attitudes about money and responsible financial behavior.
Julie Felshaw, economics and financial education specialist with the Utah State Office of Education, says kids like to learn about money because they see the things their parents do with it.
The prospect of being able to save their money for a special item or event can help (kids) learn the importance of setting financial goals and understanding willpower.
–Julie Felshaw, USOE
"They can be very impressionable and often pattern money habits from examples seen at home," Felshaw said. "The prospect of being able to save their money for a special item or event can help them learn the importance of setting financial goals and understanding willpower."
The financial future of our nation will soon be in the hands of our children. They will not only be managing their own finances, but taking the reins as community and business leaders.
We need to do everything we can to prepare children and teens for the financial challenges and temptations ahead. And it's never too early to start. Following are a few examples of potential teaching moments to help you get started:
At the bank. When you go to the bank, bring your children with you and show them how transactions work. Ask the branch manager to explain how the bank operates, the importance of saving, and how money generates interest.
On payday. Discuss how your income is budgeted to pay for housing, food and clothing, and how a portion is saved for future expenses such as college tuition and retirement.
At the grocery store. Help your children understand what various items cost. Give them a budget and a shopping list and see how they do. Explain the benefits of comparison shopping, coupons and store brands. At the dinner table. Ask your child or grandchild where various foods come from. The likely response is "the store." Then ask where the money to pay for these items comes from.
On family outings. Involve kids in the financial side of planning for a family outing or vacation. Consider setting aside a fixed amount for things like snacks, concessions or souvenirs and letting children and teens help decide how to spend the allotted funds.
Paying bills. Let children take part in paying the monthly bills. Explain the many ways that bills can be paid: over the phone, by check, electronic check or online check draft. Discuss how each method of bill pay takes money out of your account. Be sure to cover late penalties, emphasizing the importance of paying bills on time.
Using credit cards. Explain that credit cards are a loan and need to be repaid. Show them how each month a credit card statement comes in the mail with a bill. Go over the features of different types of cards, such as ATM, debit and credit.
