Today in the lunch room at school, I mentioned that next week I’m opening up a new thematic unit on money. I started brainstorming some ideas of what I could do to motivate the kids and prepare them for the unit. As I was talking with another teacher (we’ll call her Claire), she mentioned that her grown daughter who lives with her recently complained about all of her “expenses.” Claire had to chuckle at this idea because her daughter really doesn’t have many expenses; she doesn’t pay rent, she doesn’t pay for groceries, she doesn’t pay for her own car insurance, she doesn’t pay for water or power, and she doesn’t pay for gas. When Claire’s daughter heard the word “gas” she said, “I pay for gas!” But Claire realized she thought she meant for the car, not to heat water or to light the stove! She quickly realized that her daughter is unprepared for the world of adult personal finance (and she’s 22 with a college education).
This conversation with Claire led me to realize that many parents, including my own, never openly discuss the kinds of bills they have to pay as an adult. They may often complain about all the “bills” or how little money they have left after paying them, but many young adults have no idea what that really looks like. So when is a good time to teach the topic of personal finance to children? Obviously, most children have a vague understanding of the value of money, they buy school lunches or purchase small items at the store, perhaps with their “own” money. Yet, at some point, it would be in the child’s best interest to be directly instructed on what a bill looks like and the kinds that need to be paid in a household. Here are some ideas I’ve gathered that would be helpful in teaching kids about money:
- Age 5-8: Children should begin to recognize coins and bills and their values. Around the age of 7 or 8 it’s a great time to introduce the idea of an allowance and a piggy bank. Saving up for something special should be explicitly taught. The idea that once they spend that money, it will take them x amount of time to build up their piggy bank again.
- Age 9-12: By now, kids should be able to easily count on up to a few dollars. They should also be working on counting coins back, so that when they go with you to the store, they can hand the cashier their money and figure out how much change they are owed back. At this age, they can also be in charge of the grocery list, checking off items and estimating what the total cost of the grocery bill should be. (A great way to introduce bills!)
- Age 13-15: This can be a tough group to work with (hormones are raging!), however they now have enough mathematics skills to comprehend more difficult computations. Introduce a few household bills to them, talk about what is on the water and power bill, how much your monthly grocery bill is, and how you have to pay for car and home insurance monthly. I wouldn’t bombard them with all of your bills, just 2 or 3 to start.
- Age 16-18: Time to get serious! Whether you’ve talked to your kids about the household bills or not, this is the time when you should. Show them the physical bill. Tell them how you pay it monthly, whether it’s online or by check. Again, you may not want to overwhelm them with all the bills. However, I would definitely introduce the basics: rent or mortgage, utilities, phone, groceries, car insurance. Begin teaching them about how to build up their credit and why a good credit score is important. I would model this to them directly; give them an example of someone you know you has lousy credit and how difficult it was for them to purchase a car or home, versus someone with good credit and how much easier it was for them to purchase these same items, and at a better rate!
Having your young adult somewhat aware of what kinds of bills they face in the “real world” will lead to a much easier transition into adulthood. Preparation is the key to happy personal finance!
Next week I’ll follow up on the activities I planned for my third graders. I’ll also be able to tell you, first hand, if it was successful and if they learned anything from it. Stay tuned…..
Have you had personal finance discussions with your child or young adult? Did they listen to you, or was it too much information all at once?