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Teach Them Well: An age-by-age guide for teaching kids about financial literacy

teaching financial literacy

As kids begin the school year, there’s one subject that’s missing from many of their class schedules, even at the high school level -- personal finance and economics.

According to the Council for Economic Education’s 2016 Survey of the States, only 17 states require high school students take a class in personal finance. Just 20 states require a high school economics class.

That kind of financial literacy education, however, can set teens on the right path toward becoming fiscally responsible adults. High school students who took a personal finance class, according to the council, are more likely to save, pay off their credit cards each month, take reasonable financial risks and not become compulsive buyers once they become adults.

For better or worse, the onus is on parents and caregivers to ensure that their kids become financially literate.

Parents want to do right. According to a T. Rowe Price survey, nearly 70 percent of parents surveyed say they are very or extremely concerned about setting a good financial example for their kids.

But those talks about money can be tricky. Most parents -- 72 percent, according to the T. Rowe Price survey --  also express at least a little reluctance about teaching their kids about financial issues.

How can parents help set their kids up for a healthy financial future? We have expert advice for each age group.

Teaching Kids About Money at Every Age

  • Ages 3 to 5: At this age, kids often are just along for the ride. They mimic their adults and take cues from their actions. A report from the University of Cambridge encourages parents to lead by example and provide them with personal economic experiences. Take them to the bank and talk about what you’re doing. Get them involved in your regular trips to the grocery store. “The enjoyment of doing something with the parent, the familiar habit of the weekly shopping trip or the feeling of becoming a ‘grown up’ by participating in activities like going to the bank, provide sufficient meaning and motive for young children to develop these habits,” the report says.
  • Ages 6 to 12: The Consumer Financial Protection Bureau’s Money as You Grow site says children at this age are ready to start interacting with the financial world around them. They should have the opportunity to earn money and make decisions about how they’ll spend it. Parents should help them get into the habit of saving their money and comparison shopping. They should learn the difference between a bargain and a scam. If there is something they really want, help them come up with a savings and spending plan. Along the way, talk with them about their progress.
  • Teens: With just a few more years before they fly out of the nest, it’s vital for teens to appreciate the so-called MyMoney Five, as described by the federal Financial Literacy & Education Commission. They should leave home understanding the fundamentals behind earning, including salary and benefits, and the importance of saving and investing. They should know how to protect their financial health with an emergency fund and insurance. They also should understand the importance of spending carefully and deliberately, along with the benefits -- and costs -- of borrowing money. The Money as You Grow site has activities and conversation starters designed for teens and their parents.

Early and often. That’s when and how parents should broach the topic of money and financial literacy with their kids to help ensure they become the happy, independent adults we all want them to become.

Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt free. Speak with a certified counselor for a free debt analysis today

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