Guest Editorial: Are you teaching children about money?

Like it or not, a basic knowledge of money -- how to save it, how to wisely spend it, how to plan your future with it -- is important. One could argue that it ranks right up there with reading, writing and arithmetic. Yet many young people, even ...

Like it or not, a basic knowledge of money - how to save it, how to wisely spend it, how to plan your future with it - is important.

One could argue that it ranks right up there with reading, writing and arithmetic.

Yet many young people, even in this high-tech world with financial information at our fingertips, fail to possess basic money management skills.

A recent study, published by ScienceDaily, showed that nearly a third of young adults were found to be "financially precarious" because they had poor financial literacy and lacked money management skills and income stability.

Only 22 percent of the 18- to 24-year-olds in the study sample were deemed to be financially stable, according to the study. About 36 percent of the respondents were deemed to be "financially at risk" because they had experienced a significant, unexpected drop in income during the prior year. They reportedly had no savings with which to pay their living expenses for three months if needed and said they lacked the resources to come up with $2,000 in the event of an emergency.


A good way to address the problem is to start children on the path to understanding basic financial concepts when they are young. Take Charge America, a national nonprofit credit counseling and debt management agency, advises parents to start doing this when their children are as young as 2 years old.

"For better or worse, parents serve as the prime example when it comes to financial behaviors," said Michael Sullivan, a personal financial consultant with Take Charge America. "Beginning financial discussions early-on, and continuing these conversations through each age, can help kids become financially independent and confident come adulthood."

Sullivan outlined age-appropriate financial lessons that parents can instill in daily life:

Ages 2-5

• Basic money knowledge. Teach toddlers the names of individual coins and the value of paper bills. Explain how cash is deposited into a bank for safekeeping.

• Saving up. Set up a piggy bank for kids to start saving on their own and talk to them about the responsibility of keeping money safe.

Ages 5-8

• Help at checkout. Allow little ones to help at checkout, letting them purchase small items or counting cash with guidance. This helps them understand that money is exchanged for goods - and that items in a store must be bought.


• Spend/save/share. Upgrade the piggy bank to three separate funds for kids to divide their money: spend, save and share. This teaches kids how to allot money to daily expenses, work toward bigger purchases and share with others.

Ages 9-12

• Odd jobs. Parents may encourage children at these ages to start making and saving their own money through odd jobs, chores around the house or an allowance.

• Comparing prices. Discuss how to find the best price. Ask pre-teens why they think certain products might cost more than others. It might be helpful to talk about situations where a more expensive price is warranted or if a bargain price is better suited.

Ages 13-16

• Credit cards and more. This is a good age to introduce credit cards, the importance of building and maintaining credit, paying bills and other associated responsibilities.

• Gaining independence. Teens will probably show more interest in having a regular income as they age. Whether they're saving up for a car or otherwise, a first job is an opportunity to learn important life skills, including depositing paychecks, paying taxes or opening a savings account.

Ages 17+


• Higher education. Take the time to discuss college with young adults. If higher education is in their future, ask where they'd like to attend, their desired area of study, how they plan to pay for it and their expected starting salary in their chosen field.

• Loans and interest. College is frequently associated with student loans. Explain how "buy now, pay later" can result in accumulating interest. Stress the importance of reading the fine print and paying off debt consistently.

• Feeling secure. College or no college, help outline a long-term financial roadmap to support them on their journey to independence. Discuss where they see themselves in five years and explore how to realistically and financially get there.

Parents who are constantly bailing their adult children out of financial trouble and are wondering why, could find the answer by looking in a mirror.

What To Read Next