Financial Education

Most parents teach their kids about manners, good nutrition, how to drive, and hundreds of other tasks and skills that they need to learn on their way to becoming competent, independent adults. But how many families include educating their children about finances and money management in this list? Although more than half of families expect their children to be financially independent by age 21, at least 72 percent of parents express some reluctance to discuss financial matters with their children, according to a survey on Parents, Kids, and Money by the financial firm T. Rowe Price.

Clearly, parents need to incorporate money and finances in the skills and values they pass along to their children. And many of them do. But, according to the Council for Economic Education, a nonprofit whose mission is "to reach and teach every child in America about personal finance and economics"

• More than one in six students in the U.S. do not reach the baseline level of proficiency in financial literacy.

• Nearly one-quarter of millennials spend more than they earn.

• 67% of Gen Y have less than three months worth of emergency funds.

Earlier this year, we wrote about several apps and tools that could help young people manage their finances. And while these can be helpful, an even more powerful tool for enabling young people to  understand and manage their financial lives is a school course focused on personal finance. While a number of states require some coursework on this subject, it is usually only a part of a larger curriculum. Only five states require a separate, stand alone course in personal finance and only 20 states require an economics course for graduation.

The Council for Economic Education seeks to address the need for financial education by providing programs and tools to help families and educators give kids the tools they need to manage and improve their financial lives. These programs include "Never Too Young", designed teach personal finance to K-5 students in after-school/out-of-school settings.

The Council for Economic Education has numerous programs for students of all ages as well as educators and districts. If your child's school does not provide financial education, this might be a good place to begin to persuade them to do so.

Money Management Tools for Young People

Kids and teens of all ages need to be able to manage money. Whether it is understanding how far the modest allowance of your six-year-old son will go, or whether your teenage daughter wants to save up for a car, a trip, or a video game, understanding money and how to keep track of it is a crucial skill that will be even more important as young people move on to college and the workplace.

Some children and teens may find that they have difficulty keeping track of what they have and what they spend. These difficulties can be the result of problems with the underlying math and calculations involved, or impulsivity and lack of attention to detail. As with adults, kids' skills with money management vary widely and will likely improve over time, as math skills and judgment develop with age.

Parents and teachers can help children and teens build the skills they need while making money management easier and more enjoyable. The Wisconsin Media Lab provides a series of videos with lessons for students from K-12 that cover seven different aspects of financial literacy, including money management, saving and investing, and managing risk.

There are also numerous apps that kids will find fun and educational. We've listed some below:

Piggybot - free for iOS devices
This app is designed for 6-8 year olds and allows users to track allowance spending and savings.

Motion Math: Cupcake! - $5.99 for iOS devices.
Here at The Yellin Center we are big fans of Motion Math to build general math skills, and their Cupcake! game is another winner. This app, for ages 8 and up, helps teach proportions, word problems, coordinates, mixed numbers, and chart-reading by setting up and running a cupcake store.

Savings Spree - $5.99 for iOS devices
This award winning game helps children understand the consequences of their decisions to spend, save, donate, or invest. Designed for ages 7 and up, it introduces the concept of earning money and making choices about what to do once it is earned.

Mint - free for Android and iOS devices
This is a tool that allows teens -- and their parents -- to track their spending and savings by linking their bank accounts and credit cards to present a simple, unified financial picture.

Spendee - basic app is free for Android and iOS devices
Another tool for older teens and adults, Spendee helps to track expenditures, using very clear graphics.

Important Lessons In Financial Literacy

Wisconsin, as we all know, is the home of delicious cheese, Bucky the Badger, and…great tools for teaching financial literacy? Educators in Wisconsin have made a commitment to teaching students the money management skills they’ll need someday to achieve their financial goals, whether they’re facing college tuition, career decisions, debt, or long-term planning.

These important lessons seem hard to teach. Happily you don’t have to be a resident of Wisconsin to benefit; a great deal of information is available to everyone through Wisconsin’s Educational Communications Board.

The Financial Literacy: TEACH IT! site features a series of videos to help educators introduce topics like saving and investing, risk management, and being a critical consumer. Sound dry? Watch the video in which a teacher helps her children understand the relationship between risk assessment and insurance and you may change your mind.

(Click through the image above to access the video.)

In it, Ms. Pingel directs her second and third graders to place houses they've constructed into a tub filled with dirt and trees to resemble a landscape. After talking about their rationale for locating homes in different areas, she passes out a sheet of insurance options and the kids pick the ones they think they’ll need—accident, chimney, earthquake, etc.—based on the location of their house. (Prices are measured in recesses to help kids get the idea of value – personal liability insurance will set a child back five recesses!). Then disaster strikes: Ms. Pingle dumps a pitcher of water into the tub! Some houses are washed away, but the ones on high ground are untouched. Then Ms. Pingle leads a discussion about the kids’ insurance choices now that they face hard times. The TEACH IT! page has links to the handouts used in nearly all lessons, and educators can view excerpts from a Q and A session with the teacher after the lesson for further information.

The financial literacy lessons are divided by age: pre-kindergarten to grade four, grades five through eight, and grades nine through twelve. This website is an outstanding resource for teachers, but also for parents who want to teach their kids about money management but are not sure where or how to start. The ideas and videos are great starting points for important conversations that will help kids make smart decisions for years to come.

Helping Teens Manage Money

A new federal law that is aimed at the problem of credit card debt incurred by teens who take advantage of credit made easily available to them goes into effect this coming Monday, February 22nd. The new law, The Credit Card Act of 2009, modifies the Truth in Lending Act by prohibiting credit card companies from providing cards to anyone under age 21 unless they have a parent co-signer (who is also jointly obligated to pay on the account) or unless they can demonstrate sufficient income and assets to pay any amounts which might become due on the account.

In addition, no credit line increases are permitted on cards held by individuals under age 21 unless the co-signer/parent approves in writing and will be jointly responsibile for the additional credit. The new law does not affect debit cards, although new restrictions on banks limit the ability of banks to extend credit beyond the limits of the account to which the debit card is linked and then charge excessive overdraft fees when such excess charges are incurred. Still, parents need to be aware of the issues debit cards can create.

The new law targets credit card offers to students and requires colleges to make public any arrangements they have made with credit card companies to solicit students for card accounts. It also prohibits offers of credit that are accompanied by gifts or give-aways -- the free t shirt ,or umbrella, or some other item, if a student signs up for a credit card.

Finally, the law protects anyone under age 21 from prescreened credit offers, the "you have qualified for a credit card" mailings that come to your home for your 17 year old who can't manage his allowance and owes money on his library books. Nothing in the new law will keep young people from having credit cards -- IF their parents believe they can handle the financial responsibility that goes with them and if the parents are willing to stand behind their decision by being responsible for the debts their child may incur. And there is no impact on parents who decide to give their teen a credit card that is an additional card on the parent's account. What this new law does is put more authority in the hands of parents to educate their teens about credit, debt, and money and to remove the enticement of quick and easy credit from teens who are not ready to handle the consequences of their decisions.

Building Financial Skills

Does your teenage know the difference between a credit card, a charge card, and a debit card? Does he know what happens when a credit card bill is not paid on time? Can he figure out how much he will pay in interest charges for something that takes him six months to pay for in full?

Students in high school -- and beyond -- face numerous financial decisons every day and parents can't expect them to understand the issues involved in the money they spend and the expenses they incur unless they have had early and frequent exposure to what we like to call "financial education". Parents may not want to share details of the family exchequer with their offspring, but children should still be aware that bills come into the house and have to be paid regularly. Maybe they can put the stamps on the envelopes at first, and later do the math to make sure the utility bills are correctly calculated. They should see that parents write checks, or pay bills on line. They should have a bank account of their own, where they can deposit gifts and allowance, and which they can access with decreasing supervision as they get older.

We hear too many stories from parents whose children make poor financial decisons and who lack basic financial literacy, from writing a check, to managing basic financial software like Quicken, to understanding why and how they need to stick to a budget. Money is a complicated subject for adults, let alone kids. But by exposing young people to the nuts and bolts of budgets and bills at an early age, families can make it more likely that their children will understand the financial issues they encounter and become financially responsibile adults.