How to Teach Youngsters About Money

Money is often considered as a taboo topic for children to hear. Parents delay the "money" talk with their kids as much as they can. It might look like an ideal approach, but it is not. Parents need to introduce the kids to the concept of money at an early age. The more time that they have to digest what it is all about the better decisions they will be able to make with their future.

You need to start the discussion with topics such as earning, spending, giving, and saving. You need to develop a concept in these kids that they have to work in order to earn money. The smart way is to assign tasks and set minor milestones. Explain to your kids how they have to achieve the set milestones and complete the assigned task to earn money. This is the concept of an allowance.

Before you teach your kids anything, teach them link between hard work and money. You can include your kids in weekly family meetings in which you discuss the finances. Moreover, when you go out for shopping, try to narrate the entire process to them. Tell them about change, tips, and all other steps that complete a financial transaction.

By the time students reach high school, they should have an understanding of what things cost and how much work is required to buy item a or item b. I often check my student’s awareness on the concept by randomly asking them what the cost of regular household items is such as a galloon of milk or a carton of eggs.

What Should Kids Know About Money?

Most students show up at our doors understanding the general concept of currency and what it is used for. Having good money habits is something that will follow them through life and help make them productive citizens. As teachers we show them how to count it and make basic financial transitions whether it be at the local grocery store or at a restaurant. Yes, that is important for students to understand, but it barely skims the surface of what they will need to know over the course of their lives to be productive and thriving citizens. Students will often graduate high school or even college and have only a minimal awareness of mortgages and loans. I have to admit when I graduated with my Master’s degree my husband and I took out a mortgage on a relatively new home that we purchased. We were young and in our early twenties. We both were so thankful to the mortgage broker who allowed us to have our own slice of the American Dream. It was not until about two decades later, when we went to refinance the home that we realized that the terms of our loan and the rate it was built on, at the time, was so unfavorable that it was not even funny.

It is amazing that intelligent people are not well schooled on these things, but such is the way of life. If you can help children to learn basic finance lessons like what a loan is and where you get one, that is good. You should hope to encourage your students to understand what makes a loan favorable for them. They need to understand that banks exist to make money from them, not service them. Once you have this foundational thought everything else gets clearer. Here are some concepts we would like to see all students graduate high school with a basic understanding of:

1. Budget - A budget is simply a plan on how you will spend your money. It has the realistic goal of paying all your bills and living within your means. Which is a huge lesson for people at all walks of life.

2. Credit Cards - You should only use these for ease of use. Never spend money you do not have instant access to. If you are not paying the full bill off at the time you get your monthly statement, you are using them wrong.

3. Having an Emergency Fund - You should be able to cover 3 months of all your expenses at all times. All types of things happen, and you need to be prepared. You should not be buying anything that you want, but do not need until this fund is complete.

4. Debt - Taking on any form of unnecessary debt should be avoided at all costs. This is also where you would begin to talk about loans and the concept of interest rates. Students need to realize that when people begin to talk about monthly payments, those can change and often do unless you fully understand your loan.

5. Taxes - Students need to understand the different forms of tax that they are required to pay at the County, State, and Federal levels. They should also begin to understand that taxes are necessary.