This holiday season, give your kids a gift they’ll use throughout their lives—an understanding of personal finance. Studies show that teaching finance is not a top priority of the U.S. education system. Fewer than 20% of teachers report feeling competent to teach personal finance, according to a Council for Economic Education Survey, and only 17 states require students to take a personal finance course in high school.
“The majority of your kids’ financial education will come from you,” says Kathy Longo, the author of Flourish Financially: Values, Transitions, & Big Conversations. “Because we parents have such a great influence on how our kids spend, save and invest, it’s critical that we teach them early and often how we want them to value money.”
Here are Longo’s six top ways to help your kids learn about finance at different developmental stages.
Learning wants versus needs
The foundation of a child’s finance education begins with learning the difference between wants and needs. “Asking kids whether they want or need something before they make a purchase really gets them thinking about their own money values,” Longo says.
Using a three-slotted piggy bank
In grade school, it’s important to teach kids about money in a tangible way. Longo suggests giving your child a piggy bank with three slots to separate dollars for saving, sharing and spending. This separation of funds can help them understand the connection between the money in their piggy bank and the new toy they bought.
Teaching your kids the importance of giving is a lesson that can stick with them for life. Ease them in by asking your child to donate toys they no longer use, or choose an organization to donate to together on #GivingTuesday. “You can strengthen that by talking about charities you support with dollars and time,” Longo says. “This is a great way of showing them that valuing money also means helping those less fortunate.”
Making a budget
By middle school, children should have an idea of what it costs to keep the house running each month. “Once they have a concept of a budget, get the kids involved in spending decisions for big-ticket items, like a car or family vacation, and the considerations that go into the purchase,” Longo says.
We all know it’s expensive. Longo says teenagers should know early on in high school how loans, grants and a college savings plan work. Make it a point to learn about these things as a family. It’s also important to educate students about the additional financial opportunities they’ll have in life if they earn a college degree or other certifications.
Getting a job
Is there a better way for your high school student to learn financial responsibility than by working part-time? They can use these funds to pay for their gas, fun activities, etc. “This is a good time for them to get a debit card. It will help them learn the importance of a good credit history, and to see how staying within a budget requires discipline,” Longo says.
“Helping your children develop healthy money habits today,” Longo says, “will increase their chances for a happier life.”
Kathy Longo, CFP®, CAP®, CDFA is the author of Flourish Financially: Values, Transitions, & Big Conversations, and president and founder of Flourish Wealth Management®. She has over 25 years of experience as a wealth manager and financial planner. A graduate of Purdue University with a B.S. in financial planning, Longo was named one of the Top 50 Women in Wealth Management by Wealth Manager Magazine. She has been quoted in The Wall Street Journal, New York Times and Money Magazine.