Many kids receive little or no money management instruction, but having parents and other caregivers teach them basic financial literacy would go a long way toward improving that situation, said a Texas A&M AgriLife Extension Service family economics specialist.
“Children aren’t born with money sense, so they need parents, educators, caregivers and other adults to help them learn how to properly manage money,” said Angela McCorkle with the agency’s Family and Community Health Unit. “The ability for children to learn how to properly use money is something that will benefit them throughout their entire adult life.”
McCorkle said a survey from the Hartford Financial Services Group shows only about 24% of students and 20% of parents say students are prepared to deal with the financial challenges awaiting them in the adult world.
Children learn money management by example
McCorkle said children learn about money by example and experience, and parents can begin to teach them sound money management skills as soon as they are old enough to understand the basic concept that money can be used to get them the things they need and enjoy.
“Children absorb what they see and hear adults do or discuss related to money, so it pays to become a positive role model,” she said. “A parent’s values as they relate to money – such as how they spend, save, borrow, use credit and the like – are the values children are most likely to emulate and adopt.”
For example, McCorkle said, if a parent uses a list for shopping and maintains a budget, their children will consider that normal and probably grow up to use a list and consider cost when they begin to shop for themselves.
“But if you spend money before you actually have it and buy impulsively, your kids will likely learn those habits as well,” she said.
She said it’s important to include children in discussions about budgeting family income.
“Being able to set financial goals, budgeting and then matching spending with planning is a life skill that takes practice,” McCorkle said. “Learning to properly manage money allows young people to distinguish between wants and needs, teaches them the importance of budgeting and saving and helps them make sound spending decisions. On the other hand, not learning can lead to embarrassment, financial stress and personal anxiety.”
Resources for teaching youth financial management skills
McCorkle said information on teaching children about financial management skills and habits can be found at the eXtension website, which offers an extensive collection of educational articles created by experts at the country’s top land-grant universities. One of the site’s free resources, Talking to Children About Money, is a guide on how parents can address money issues with children and help them develop money management skills. It also has a Financial Security section with a Children and Money tab, which gives access to additional resources.
She said AgriLife Extension’s youth financial literacy program Welcome to the Real World provides practical money management experience to older children at their schools.
“This program is for high school-age students and teaches financial management skills in a simulated environment,” McCorkle explained.
In the program, students receive classroom financial lessons that include careers, budgeting, financial tracking and general money management. Instruction includes going through the process of receiving a paycheck, putting money in a savings account, depositing money in a checking account, and balancing a checkbook, along with making spending decisions.
McCorkle said the program is available only through a limited number of AgriLife Extension offices, so Texas residents should contact their county office to see if it is available locally.
“When youth enter the workforce without a basic understanding of financial literacy, they face significant issues, ranging from excessive credit card debt to insufficient savings to inadequate retirement planning,” McCorkle said. “The financial choices young adults make have a lasting effect on them. If not handled correctly, they can lead to a lifetime of debt and financial stress or economic stability.”