An Unlikely Legacy: Financial Literacy for Our Kids
Why Financial Literacy Matters for the Children in Your Life
If you are a parent, there is likely nothing more precious to you than your children. If you are not a parent, you still may have special children in your life...nieces, nephews, other relatives, or friends...who mean the world to you, as well. Nothing compares, or even comes close, to meaning as much to you as these special little human beings. We tend to invest whatever is required to give our kids the best or to make them happy. We work hard and build our lives around our own goals and dreams, but also with an eye toward what we can give to our kids in life or a vision of the legacy we can leave. We may think of legacy in terms of the values we teach, the wealth we share, or simply the possessions we pass along. Arguably, one of the most important aspects of legacy that we can provide to our children, the world’s future citizens, is that of financial literacy.
Why then, is teaching our kids to be smart about money not a higher priority in our culture? The US ranks 14th globally in terms of financial literacy, with only 57% of adults qualifying as understanding key concepts, such as interest and inflation. Personal finance is generally not taught in our schools. Only 17 states across the country require financial literacy programs in high school, according to a Jump$tart Coalition survey, and only seven states test students’ financial proficiency. Young people often learn about money informally through socialization, as they observe and listen to their parents, caregivers, and peers. It is not surprising, then, to note that a T. Rowe Price study found a significant differentiator for kids who feel smart about money is whether their parents discussed financial topics with them or not (61% vs. 41%).
Starting the Financial Conversation: Key Steps and Tools to Teach Children About Money
If we want our children to be good financial stewards, we must start the conversation. The key components of financial literacy include:
understanding the concepts of living within your means
defining your goals
saving effectively to meet those goals
making smart decisions with your savings
Since many adults struggle with at least some of these aspects, it’s doubly challenging to determine where to start with a child. Your tactics must be age-appropriate, engaging, and rewarding to be effective with a human of any age!
There is no shortage of tools, including books, articles, studies, guides, and apps, to help with building a sound strategy for teaching a child to be financially competent and to have a healthy relationship with money. Of course, the concepts to be taught and tools to apply vary according to the child’s developmental stage.
Here are some key steps and resources to help you get started:
Determine your strategy:
This book is a great place to start: Money-Minded Families: How to Raise Financially Well Children by Stephanie Mackara. It offers advice on how every adult and child can be "financially well." The book explores how we can align our individual values with finances while planning for a more secure financial future.
Decide on your tactics and tools:
It’s important for the experience to be engaging and the process flexible and sustainable. Try this for information on what to look for in a guide or program: financialeducatorscouncil.org, Financial Literacy for Kids: Top 8 Lessons, Activities and Delivery Tips|NFEC
Establish a support system:
As with tackling any difficult task on your own, finding others to share ideas and experiences with can be vitally important. While there are many, many books, checklists, and lists of tips available, finding community around teaching finances to kids is harder to do. Facebook, Instagram, and a search for blogs are places to start. If all else fails, bring it up with friends or at other parent support resources you may participate in. This may be difficult because people don’t like to talk about money in general but persevere. The benefits of the potential conversations can be substantial.
Imagine a world in which most people have grown up with solid financial foundations and healthy relationships with money. The resources exist, and you can leave financial literacy as a valuable legacy to your children!
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