It’s Never Too Early to Start Learning About Money
When I was a kid, there weren’t any classes that focused on financial education, not in high school or college, and certainly not in elementary school. In fact, no one really discussed it much at all. Financial education was not discussed in our home or in any of my friends’ homes for that matter and it was not a focus of any business that I was aware of…not a focus for employees or even clients.
So, when you think about it in those terms, it should not be a surprise that a lack of financial education contributed, in part, to the economic difficulties we are currently facing. Only in the last few years, have we started taking the time to look at our credit reports and understand how our behavior impacts our credit scores. It also appears to have taken the “Great Recession” for many of us to figure out that we cannot spend more than we earn over a prolonged period of time.
Now, businesses, networks, and publications are clamoring to provide us all with more financial education than we previously knew existed. There are television programs, columns, blogs, podcasts, seminars, webinars, workshops, and courses solely devoted to financial education. Some are helpful and worthwhile, others not so much. Like anything, no educational effort will be as successful as the one that takes place in peoples’ homes during the formative years of a child’s development.
Education always has the most impact when administered before someone has had the chance to develop a bad habit or a mistaken belief and providing a fundamental financial education to your children cannot start too early.
When you are alert to them, there are plenty of opportunities to spend a few minutes to teach your children about money and finances without laboring on the subject or talking about matters that may or may not be understood.
For instance, a visit to an ATM could be an ideal time to share some of the basics of money and financial transactions with your children. Providing your children with brief explanations of deposits and withdrawals is a great starting point and related questions will often arise from these initial conversations. How do you earn money? What do you spend it on? How do you know how much money you have?
Another routine event that presents an opportunity to begin to educate your children on finances is when you sit down to pay some bills. As an adult who has paid my share of bills, I am still amazed at how much things cost. It makes sense, then, that kids might also be surprised by the cost of things like the groceries they eat and the clothes they wear.
Kids are especially alert to discovering new things and once they discover something new, they usually want to know more about it so if you are really committed to providing basic financial education to your children, you can turn the mundane act of paying bills into an all out math contest for your kids. If we have this much and we pay that much, how much will we have left? You get the picture.
The concept of budgeting also lends itself well to the type of educational situation that kids will respond to. There are numerous ways to incorporate addition, subtraction, and multiplication into a budget explanation.
All of these examples also create a chance for you to convey the importance of saving to your children. Whether you are going to the ATM, paying bills, or budgeting, there must first be money available before any of these actions take place. If your child understands the importance of saving, developing an awareness of costs and expenses follows close behind. This understanding may even lead to lower household costs because your child may be more likely to take care of something or make household supplies last longer simply because he or she has a basic awareness of money.
While the topic of financial education could at first seem imposing and complex, in its most basic forms it can be explained in very understandable terms to children of very young ages and the sooner you start the process, the more prepared your kids will be to navigate their own finances as they get older.
All of us teach our kids to beware of strangers and to not readily accept anything from them, yet every year kids go off to college and accept credit card offers from people they have never met and companies they have never dealt with often leading to circumstances that they did not anticipate. Some of these situations can be avoided just by creating chances to talk with your kids about money early and often.
Recently, you have probably heard people claiming that they have debts (namely mortgages) that they cannot pay because they did not understand the terms of the loan they took out when they signed for it. Would you allow your child to use that claim as a valid excuse for not passing a test in school? Of course you wouldn’t. You would remind your kids that they knew the test was coming and that they had plenty of time to study for it. If that excuse is not acceptable when you are child, it will not be acceptable to you as an adult and you will be far more likely to read and thoroughly understand documents associated with the financial decisions that you will make.
When you take the time to learn about something, you invariably develop a greater understanding of it and when you develop a greater understanding of something, you develop an appreciation for it. Ultimately, you make it a matter of personal importance.
This could not be truer when it comes to your personal finances. If you have an appreciation for money and finances based on a solid understanding of how the basics work, you will be more respectful of your finances and be far less likely to be intimidated by them.
If you help your kids to develop this understanding at an early age, it will help them create a strong foundation from which they will be able to make healthy decisions that will benefit them and your family financially.
Scott Arney
Chief Executive Officer
Chicago Patrolmen’s Federal Credit Union
