The opposite of spoiled: The right way to teach kids about money
Photo courtesy of J.D. Roth
Editor's note: Ths post originally ran on the personal finance blog Get Rich Slowly. It has been reprinted her with permission.
What’s the best way to teach kids about money?
That question has haunted folks for decades — maybe centuries. There are dozens of financial literacy programs in the United States right now, but none of them seems to be effective. Why is that?
I’ve written before about why I think financial literacy education fails. Here’s the short version: Most financial literacy fails because it focuses too much on mechanics — how bonds work, the magic of compound interest — and not enough on behavior. While mechanics are key (they’re the foundation, after all), they’re not the most important aspect of financial success.
Here’s an analogy: My brothers know how to read and write. They’re smart guys, and they’re both literate. But just because they know how to read and write doesn’t mean they practice those skills. One of my brothers used to proudly declare, “I haven’t read a book since high school.” (Oh, how that hurt my book-loving heart!) Knowing how to read doesn’t make you a reader. And knowing how to save doesn’t make you a saver.
Financial literacy is not the answer. We’ve got to do something more if we want to teach our kids about money.
Recently, I’ve had two great conversations about this topic. The first was with John Hancock, the president of the Portland chapter of Junior Achievement, a non-profit group focused on helping kids learn about money and entrepreneurship. He and I met for coffee last week, and we chatted about his own efforts to improve financial literacy.
Tip: Teach children the importance of creating an emergency fund. You can even go so far as helping them open their own online savings account, or one with a local bank to get started. Like me, Hancock thinks it’s important to focus less on the “how to” and more on the “why” when it comes to money. He wants to change behavior. His goal isn’t to just educate young people about money, but (as he puts it), “to change habits of the hands and habits of the heart”.
Hancock thinks it’s important to put people into active simulations, such as role-playing. To that end, his group puts on an annual event for kids called Biztown, which lets them experience a simulated city environment. The children take on the roles of various business and professional leaders in an interconnected community, and they learn how to manage their own personal finances. I know several kids who’ve done this program, and they love it. So do their parents. The experience seems to have a positive effect on their attitudes toward money.
I applaud Hancock’s efforts, and hope to work with him in the future to improve financial education in our area.
Earlier this week, I had a long phone call with Ron Lieber, who writes the “Your Money” column for the New York Times. He’s currently on sabbatical to write a book called The Opposite of Spoiled, in which he hopes to teach parents how to raise children with financial maturity.
- The new face of extreme poverty in America
- Renovation Solutions: What to consider when...
- How innovators think, and what they do about it
- Should grads be allowed to declare bankruptcy...
- Are you as connected as Kevin Bacon and does...
- 11 guaranteed steps to cut family spending
- My view: Utah should not raise minimum wage
- In our opinion: Family dynamics and the...