By Bruce Farr
Most people would agree that these are times of confusion and insecurity about money and finances in general. But even in this perplexity, one thing is certain: Teaching kids about money and personal finance is badly neglected in the U.S.
A recent survey conducted by CNBC and Momentive discovered that the majority of parents (83 percent) say they are responsible for teaching children about money, yet only 31 percent say they never talk to their children about household finances. The same survey revealed that only 15 percent of parents said they spoke with their children more than once a week about household finances.
21st century money
Let’s face it, money and finances have become more complicated in the digital age. In decades past, it was far easier for children to learn and understand the basic concept of monetary transactions. In any number of day-to-day scenarios, they watched their parents purchase a commodity—a loaf of bread, for instance—and then pay for it with cash from their wallet.
Now, however, those simple, direct transactions have been replaced by a variety of non-cash payment functions: credit or debit cards, mobile-phone accounts and apps (e.g., Apple Pay, PayPal, Venmo, etc.). And while these modern-day forms of payment may, in fact, automate and streamline the transactional process for adults, as far as children are concerned, they tend to make it muddier and less understandable.
The same goes for the related concept of saving money and building interest on it. Surrounding the topic of financial transactions is the process of how people obtain and “grow” money. In many families, children may imagine that, at least in their parents’ hands, money is plentiful and available on demand. In less-affluent families, kids might be all-too aware of its short supply. In either case, it becomes incumbent upon parents to introduce their children to the idea of money and the activities that surround it: earning it, accumulating it, saving it, and spending it.
Kids’ crusader
Tom Henske is a dyed-in-the-wool money and finances professional who’s betting his career on the importance of teaching kids about money. A certified financial planner, Henske built a successful wealth management firm in Manhattan after he recognized that no matter how smart and savvy his own children and their friends seemed to be, when it came to banking and money matters, they were seriously “unschooled.”
In fact, as Henske relates from his experience as a parent and a high school soccer coach, he reached a point where he observed that most kids he came into contact with displayed a real deficit of knowledge about finances.
“Recognizing that, it became my ‘crusade,’ to teach kids about money,” he says.
Last year, Henske sold his business and began focusing full-time on how to teach kids about finances. He put together a plan and began speaking to local groups about helping children learn the art of managing money. Then he wrote a step-by-step guide to teach parents and kids how to do it. The resulting book, “It Makes Total Cents,” focuses on 12 conversations that parents can have to help change their children’s financial future.
“Parents avoid this conversation because it’s a little uncomfortable to talk about,” Henske says. “In years past, [family finances] was an off-limits subject in the household. For the most part, discussing money with their kids simply wasn’t done.”
In just the last few months, interest in Henske’s book and its concepts have exploded.
“It’s really been mind-blowing,” he says. “It seems like I’ve struck a chord with parents who are a little embarrassed that they haven’t taught their kids about money, and—especially for the parents of younger kids—they’re worried that if they don’t focus some time on their children’s financial education, then what?”
Pique their interest
Henske believes that social media, if it’s harnessed properly, can be a key to younger people desiring to learn about the ways and means of money management.
“If you can make your kids curious about money, instead of them just glancing over those topics on whatever social media platform, they might just stop and take a look at sites, news and information about money,” he explains.
Here are some suggestions from Henske on how to stimulate and nurture children’s interest in money:
- It’s important for kids to have money in their hands—some capital—in order to learn how to manage it.
“Whether it’s from their allowance, or odd jobs like babysitting or mowing lawns, we—as adults—need to teach kids how to accumulate money. Giving kids income-earning opportunities can get them to focus on purposeful work and grow their unique personal interests. And the possibilities are virtually endless.” - Teach them the value of a dollar.
“The way to do that is simple: Just walk around with them and ask them ‘How much do you think this or that costs?’ ” - Teach them about compound interest.
“If you can get them excited about what compound interest is and how it works, that will drive everything else for them. Because once they see their money compounding in an account, they’ll also start thinking about budgeting [to increase what they can deposit into an account], which will lead to learning about investing. If you get the compound-interest lesson right, then you’re off to the races.”
GISS
Henske isn’t the only kids’ financial crusader. Nancy Phillips is the author of the popular Zela Wela Kids series, an inviting, neatly designed set of volumes that teach young children a variety of life skills. At least one in the series focuses on basic money management techniques for children and young adults ages five to 17, so they will be better equipped to make wise financial decisions and successfully control their financial future.
In a recent podcast, Phillips, the mother of two, commented on the appropriate age to begin teaching kids about money.
“We know now from extensive research that children learn their belief systems and attitudes about money at the same time as they’re learning about everything else—that is, in their formative years,” she notes. “So we have found out that children actually have their money beliefs already in place by the age of seven. That means we need to start way before that—kids as young as two or three understand [a basic transaction], that you’re giving something and getting something back.”
Phillips strongly encourages teaching children the value of a dollar. “I recommend the GISS method,” she explains. “Give, invest, save, spend. Part of their allowance is to give, part is invested, part is saved, and part is theirs to spend as they wish.”
Helpful resources
Alongside youth-focused financial programs like Henske’s and Phillips’s, banking institutions throughout the U.S. are getting on the bandwagon to offer very accessible teaching aids to help kids of all ages improve their financial acumen. One example is the FDIC’s “Money Smart for Young People” series, which consists of four free, downloadable modules that cover pre-K through high-school-age children. Each age-appropriate curriculum includes lesson plans for educators along with guides for parents and caregivers.
Overarching the FDIC’s Young People series, its “Money Smart for Young Adults” curriculum is aimed at youth ages 12 to 20, guiding them through the particulars of handling their money and finances. This comprehensive tool includes the important lesson of teaching children how to create positive relationships with financial institutions. Each of the eight instructor-led modules includes an instructor guide, participant guide, and PowerPoint slides.
Likewise, the American Bankers Association (ABA) recently celebrated 25 years since it launched its popular “Teach Children to Save (TCTS)” program. TCTS offers ABA member banks and their clients the opportunity to help people of all ages develop the knowledge, tools and capabilities they need to make informed decisions throughout their financial lives. At its essence, TCTS gives young people the tools and inspiration for a successful financial future.
When it comes to the importance of teaching kids about money, financial expert and journalist Cameron Huddleston sums it up it as well as anyone. Writing in Forbes magazine, she says, “If you want your children to develop good spending and saving habits, they need to see you making smart spending and saving choices. In short, [parents must] practice what [they] preach. And preach with consistency. Educating your children about personal finance is a process that can take time. But if you put in the effort and continuously communicate a clear message about money, you will instill good habits that will serve your children well.”
Money books for kids
In addition to the programs cited, there are a number of highly recommended books to help children learn some important concepts about managing their finances.
Young children
- “The Berenstain Bears’ Trouble with Money,” by Stan & Jay Berenstain
- “Money Hungry Monkey,” by Paul Peters
- “One Cent, Two Cent, Old Cent, New Cent: All about Money,” by Bonnie Worth
- “If You Made a Million,” by David M. Schwar
Older children
- “101 Ways to Bug Your Parents,” by Lee Wardlaw
- “Room One,” by Andrew Clements
- “The Get Rich Club,” by Dan Gutman
This content was originally published in our award-winning magazine In Your Corner. See Issue 13 here: In Your Corner Magazine | Spring 2023