From the Piggy Bank to Better Savings: Financial Literacy for Children
Apr 24, 2022 02:00PM ● By Candice Stewart
As a child, I was first introduced to personal money management by way of a savings account at a commercial bank. I also had a piggy bank. With my medium of attempting to save, where I would drop coins and cash through the slit of the piggy at the end of each week, I felt empowered to know that I had my own money. Every month, I would empty my piggy and lodge the funds in my savings account at the bank.
With the help of my parents, I had a head start on real personal money management. However, that was where it tapered off until I transitioned into that awkward teenager-but almost a legally recognized adult. So, what happened in the gap years?
The explicit lessons to teach me about the benefits of good money management, why it’s important to save and other ways of saving money, were nonexistent. While I had a head start at home, school dropped the ball. The focus was more on the academic (learning algebra, how to calculate hire purchase problems, how to conjugate verbs, the principles of science subjects etc.). There were little to no lessons on financial literacy.
Whereas I was a few steps ahead in comparison to others, other fundamentals of financial literacy were missing. Sam X Renick, co-creator of Sammy Rabbit, a children’s character and financial literacy initiative says “Money is central to transacting life, day-in and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift giving, vacations, entertainment, heat, air-conditioning, insurance—you name it, money is involved.” So, “Without a working knowledge of money, it is extraordinarily difficult to do well in life.”
If what Renick says is true, then why do we short change children? It is the responsibility of parents and guardians to prepare their children for the world and a big part of that ought to be good money management. Better must be done.
It’s a horrible situation entering adulthood with expectations placed on you to properly manage your finances responsibly when there was little to no opportunity to learn about it.
Research indicates that there is a strong correlation between financial literacy in children and future financial well being. A 2018 study conducted by Christiana Stoddard and Carly Urban for the National Endowment for Financial Education posits that “students who are required to take personal finance courses starting at a young age are more likely to tap lower-cost loans and grants when it comes to paying for college and less likely to rely on private loans or high interest credit cards.”
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Image Source: Pixabay.com
Tips on Teaching Children Good Money Habits
Instill a habit of saving - Renick says that “saving teaches discipline and delayed gratification. It teaches goal setting and planning. It stresses being prepared. Additionally, saving builds security and independence.
A piggy bank or a savings jar can come in handy here. If they want to purchase something on their own (a toy for example) or if they have some financial goal, saving money using either is a good way to start. You may take it further and walk your child through the conditions of a savings account at your bank and give them a debit card (with parental controls) to help foster good spending habits. This may better teach them the necessary lessons in reward with the right approach and consequences with the wrong approach.
Create Opportunities to Earn - Some children get an allowance while others don’t. From allowances, you can teach children how to properly budget the money they receive, how often they receive it, how they spend it, and otherwise allocate it. For the children who do not receive allowances, help them using other methods. You may incentivize household chores - so for every x chores completed properly, the child may receive x amount of $.
You may consider going even further and helping your child to start their own business. Taking this route will unlock a number of financial literacy lessons as well as business management lessons.
Be a Model of Good Finance Behavior - often, what children see, they replicate. As such, if you really want to teach them how to be responsible about money and finances, you have to be a model of positive influence. So, try not to spend impulsively or display a nonchalant attitude towards wasted money.
Teach Children How Their Money Can Grow - saving is great, but little by little, teaching children about investing and growing wealth will go a long way. Many tend to underestimate their children and their ability to grasp the knowledge, but this is where you adapt your methods according to how they learn.
Financial Literacy and Race
In a 2021 CNBC report, in the US, 21 states mandate that students take personal finance coursework in order for them to graduate high school. Of that 21, only a handful of states mandate that those courses be stand-alone classes – this, according to the Council for Economic Education.
Even with that type of progression in financial literacy in children, the access to education stays unequal with an unclear impact. It was reported that in 2019, the median wealth of Black households in the US was $24,100 while White households reported $189,100.
Research by Next Gen Personal Finance states that 7.4% of Black and brown students are required to take stand-alone personal finance courses in order to graduate high school.
Source: Next Gen Personal Finance
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In response to the report, Yanely Espinal, director of educational outreach at Next Gen Personal Finance warns that the racial gap will get wider. She states that the financial decisions and behaviors are not going to improve any time soon and it will lead to another debt-riddled generation. Though financial literacy is not the only contributing factor to the racial wealth gap, it is part of the solution.
Since necessity is the mother of invention, some schools within the US have opted to fill the gap in access to financial education.
In 2020, students from the Prince George’s Public Schools in Maryland advocated and called for requiring a personal finance stand-alone class in the schools within the district. The Prince George’s Public School district is one of the largest and among the most diverse in the US with 55% of its students being Black and 36% being Hispanic or Latino. Based on the advocacy of some of the students, the financial literacy course is now a requirement for students to graduate high school as of 2024.
Among the students leading the charge is Zoë McCall from the Academy of Health Sciences in Largo, Maryland.
Zoë McCall advocated for a mandated personal finance class for all high schools in Prince George’s County, Maryland. | Source: Drue Thornton on CNBCLearn more about credit:
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“Not all of us know how credit works. Not all of us know how to get a loan and stuff like that,” she says after stating that she has had financial discussions at home but wanted to know more. “We’re going to need to know how to take out a loan to pay for college, we’re going to need to know how to pay back student debt, we’re going to need to know the basics of money, and not a lot of us do,” she continues.
This is a major win in improving the access to financial literacy education.
Dr. Monica Goldson, CEO of the Prince George’s Public School district says, “We want them to walk away with knowledge of how to earn money, how to make money work for them and the know-how to stay out of debt or manage debt they may incur,” and we couldn’t agree more.
Dr. Monica Goldson | Source: As much as it is important for all children to be financially literate, it is especially important for children who are considered economically disadvantaged to have access to such knowledge.
Dr. Goldson also says,” It is our hope that this financial education will empower students to make their money work for them and ultimately will be a catalyst toward upward mobility.”
Honorary Mention – The National Urban League
The National Urban League has a Project Ready Initiative that supports youth in and outside the classroom. Their work includes financial literacy education. The Project Ready Initiative prepared African American and historically underserved youth in grades 8-12 as they prepare for the next step of their educational journey.
In closing, give children a fighting chance to be better functioning adults by teaching them about money and how to properly manage it. We can’t expect them to automatically know how if they are not taught. So, the same effort that is placed on ensuring children excel in traditional lessons at school and home should be present in ensuring their financial literacy.
Sources:
How To Teach Your Kids Good Money Habits – Forbes Advisor
Teaching Personal Finance To Kids Can Help To Close The Black Wealth Gap - CNBC
Giving Kids An Early Financial Education Pays Off In The Future – CNBC
Our Approach – National Urban League
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