Money is a taboo subject among most Americans, and few families even stop to consider discussing the household budget with their children. But with consumer debt totaling $13.4 trillion in 2010, according to the Wall Street Journal, students need a sound financial education just as much as they need a firm foundation in other subjects. Financial literacy is essential for students if they are to become productive citizens when they graduate and join the workforce.
I remember as a kid growing up that money was basically never discussed. I didn’t know how much my parents made, whether or not we even had a mortgage on the house, if there was credit card debt, or even if there was a plan to pay for my future college education. It’s certainly not necessary for kids or teenagers to know the inner workings of the family finances, but having some discussions about the household budget or spending, especially at a young age, can go a long way to instill good money habits later in life.
Learning About Money Outside of the Home
At the elementary school level, education in personal finance can begin with a classroom economy in which children earn points or pretend money they can trade in for rewards like fun activities or small prizes. Once children get to middle school, they are ready to handle some more advanced topics. Junior high students can learn about making choices and saving money for something bigger in the future. They are able to delay gratification and plan for the long term. Students this age also have some opportunities to earn money through babysitting, paper routes or other work, and may have some money to put in a savings account. Providing information on this can prepare them to open an account with a parent’s help.
By high school, students can and must learn some higher level personal finance skills. From budgeting their paychecks to choosing an inexpensive or free checking account, teenagers need an understanding of consumer spending before they graduate high school and leave their parents’ care for college or work. High school teachers can cover topics including payroll taxes, budgeting for living expenses and being aware of how media and advertising affect our spending.
Unfortunately, a lot of this is wishful thinking. While students are sure to cover things like economics at some point in their education, in many cases very little is taught in the way of true personal finance. This isn’t meant to downplay economics or other important aspects of the curriculum, but if personal finance issues aren’t being taught at home and are barely covered in school, most young adults will enter the real world and be ill-prepared for making even the smallest financial decisions.
One area of education that can have a huge impact on students as they approach the age of 18 is consumer credit, and specifically, credit cards. Credit cards come with attractive freebies, fast-talking sales pitches and promises of all manner of rewards, and there are heavy marketing campaigns targeted toward young adults. Without even a basic understanding of how credit cards work, how interest affect how much you’ll need to pay back, and how damaging going into debt can be, most college students are bound to make mistakes, and they can be costly.
If you are the parent of a child, young or old, it’s time to have a talk and open up the dialogue about money. If your child ever asks you about money or why you can’t afford something, use it as a teaching moment. Sit down with them and explain the situation. You don’t need to get into every detail regarding your financial situation, but use your scenario and what you’ve learned to help them understand how important these money issues are and how they will need to be prepared for them when they get older. If you don’t take the time to help them at a young age, you can pretty much expect them to be left to figuring things out on their own and repeating many of the same mistakes.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.