Why is it important to start financial literacy education as soon as possible for children, and how can parents and teachers best support their kids?
As appeared in the Cleveland Fed Digest's Ask the Expert
People encounter money throughout their entire lives. It doesn’t start with our first job or once we turn 18. As soon as we start having money, even if it’s $1 from the Tooth Fairy, we have stepped into handling our finances.
Because of my job, there are not many weeks that go by that I don’t talk to a student classroom. I talk to students in kindergarten through 12th grade, and even when I talk to, say, fourth graders, I encourage budgeting. I say, “You’re probably listening to me and saying to yourself, ‘I am not an adult, why would I need to know how to budget?’ But you could budget your Halloween candy. And if you do have money, it’s your decision on what you want to do with it. For example, you can choose to spend it now or save it for later.”
Teaching children about budgets is going to help them as they advance into their financial future. So will helping them learn about net income versus gross income, fixed expenses versus variable expenses, and credit scores. When I talk to students, I always compare being financially literate to being in the driver’s seat. Maybe we don’t know exactly how to get somewhere, and sometimes we take a wrong turn. But having knowledge gives us the roadmap to change our course when we need to.
For those wondering how to talk to kids about money, I recommend being open to having conversations. Sit down and create a budget together. Make lessons relatable; for example, you can encourage a gamer to budget their digital dollars from their video game. Emphasize that managing money is not all or nothing—you can choose the pieces and parts that best fit your situation. When I give presentations to students, I poll them: Who’s a saver? Who’s a spender? I admit to them that I’m a spender. Is that a terrible thing? Not necessarily. It’s more important to understand how you manage money and where to find tools that can help you to do that. Different people have different situations, and everyone has to make the best financial decisions for themselves. How you use tools and skills might look different than how I use tools and skills.
When I talk to students, I try to be as transparent as possible. I didn’t understand credit and how important credit is to your future until about a year ago (I’m in my twenties). An adult in my life sat me down and explained why it’s good to have different kinds of debt that you’re actively paying off. Having conversations about finances with students from a young age gives them examples and shows how finances are important when they get older. If we’re transparent—if we explain the mistakes we’ve made and what we did differently to correct those mistakes—it’ll prepare children to make sound choices and let them know they have someone they can turn to for these important conversations.
Elle Benak is an education and museum outreach coordinator at the Cleveland Fed. She hosts field trips, creates educational content including curricula, and manages programs such as What’s Next?, which helps students explore paths after high school that don’t include college.
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