Financial literacy important to kids’ future

Research conducted by Indiana State University’s Networks Financial Institute found that despite the pervasiveness of spending in our society, the majority of parents do not feel comfortable with their knowledge of personal finance.

And while middle and high schools are increasingly requiring personal finance to be covered in their curriculum standards, experts say that the time to teach youth the financial facts of life should be much earlier.

According to financial literacy experts, the average 2-year-old has participated in 200 shopping excursions. That same toddler has also witnessed Mom or Dad swiping a card to pay for their purchases dozens of times, not to mention seeing them using an ATM, where cash seems to magically appear with the press of a few buttons.

Children are remarkably aware of their parents’ financial habits and situation, according to Pamela G. Yellen, author of “Bank on Yourself: The Life-Changing Secret to Growing and Protecting Your Financial Future.”

“Kids are a lot smarter and perceptive than we realize,” Yellen said.

She suggests it’s time for us to ditch the fear about engaging in conversations about money.

“The best-adjusted kids are those who have been included in the family discussions about money,” she said.

The facts of life

April is Financial Literacy Month, and financial experts are hoping raising awareness will help turn the tide.

The economic chaos of recent years has already prompted consumers to shop wisely and reassess their spending habits.

Nicole Hall, editor in chief of in Charlottte, N.C., said if we can make our kids money smart now, they will enjoy a lifetime of financial literacy and responsibility and, hopefully, not make the same financial mistakes of previous generations.

“A lot of parents wait until kids are in high school, but we believe the earlier, the better,” Hall said. “When kids are little, explain as you do things when you make purchases, and lead by example. Take them grocery shopping and ask them to find the best prices on graham crackers, for instance. As they get older, you can involve them in more complex lessons, and you can start by talking about costs and having them save money to buy a toy or something special.”

Terrie Krumal, education and marketing coordinator for the local Consumer Credit Counseling Services/Graceworks Lutheran Services, said it’s crucial parents understand their own feelings about money and what financial lessons they were taught.

“Parents have the greatest influence when it comes to money management, and sometimes I think we feel we don’t have the best grip. It’s OK for us to learn right alongside the child, as long as we are willing to make changes,” Krumal said.

Pay day

Financial experts say establishing an allowance helps kids understand the natural order of money and the importance of a good work ethic: The way to get cash is to earn it.

And teenagers can start earning additional money by raking the leaves, for instance, or baby sitting or dog walking.

“Allowance is a great way to teach kids how to budget and the general principle of saving money,” Hall said. “It’s a very basic way of how to live on a fixed income and to save for your wants and needs. Kids see their parents with easy access to credit cards, but allowances are a great way to illustrate the importance of saving for what you need or want.

“It might seem antiquated these days, but a piggy bank is a great tool for kids.”

Shop around

Krumal said ideally kids should be part of the family budgeting and spending process. “Take the kids to the grocery store and show them your shopping list and your coupons,” she said.

Krumal encourages involving kids in comparison shopping. Activities can include asking them how many people could be fed on one box of macaroni and cheese and introducing the concept of off-brands.

“You can even take them with you when you go to the dollar store. And give them a dollar and tell them they can choose whatever they want.”

She suggests posing these questions when traveling in the car: How much does a gallon of gas cost right now? Are we using gas wisely? Maybe you can walk to your friend’s house?

The tools

Armed with kid-friendly books about money management, parents can encourage smart spending habits in their children.

Ellen Sabin’s book “The Nickels, Dimes and Dollars Book: A Wise Kid’s Guide to Money Matters” includes descriptions of key money concepts and exercises that help children distinguish between wants and needs, understand the concept of savings and set priorities for charitable giving. It is appropriate for ages 6 through 11.

“Today’s college students are graduating with more credit-card debt than ever before, meaning that many of them are starting their adult years by making decisions that could negatively affect their futures,” Sabin said. “Laying the foundation of financial literacy at an early age will help children develop smart money habits that can become the backbone of their relationship with money for the rest of their lives.”

The book, of which the first 7,000 copies were underwritten by the McGraw-Hill Companies as part of its Financial Literacy Now campaign, is especially effective when families participate together. Yellen recommends scheduling a weekly or monthly family night that is devoted to reading and discussions about finances.

Yellen said two of her favorite money reads for kids are “Rich Dad, Poor Dad” by Robert T. Kiyosaki and “The Richest Man in Babylon,” a classic by George Samuel Clason that delivers financial advice through a collection of parables set in ancient Babylon.

She added that board games as Life and Monopoly are family-friendly ways to play, learn and grow.

Interactive websites also are specifically geared toward promoting financial literacy in children.

Indiana State University, for instance, provides age-appropriate personal finance information for students in grades three through five at Parents will find tips for talking to their children about money, and kids can take a virtual field trip to the community of Nickelsburg, where concepts like wants vs. needs and delayed gratification are explained through interactive games and activities.

All activities are mapped to Department of Education state standards in reading, math and personal economics and reinforcing classroom learning.

Another website that allows kids to manage their allowance online for a $30 yearly fee is www.three It establishes an engaging three-jar system — one for savings, one for spending and one for giving.

Furthermore, most major banks have sections of their websites devoted to money management.

As a father of three, Rudy DeFelice, of Pacific Palisades, Calif., founded, a free website enabling families to set meaningful financial goals and giving kids a head start in their financial lives.

Yellen has a motto that he believes all children should grow up learning: You need to rely on yourself, and you are responsible for your financial future.

Contact this reporter at (937) 225-0671 or

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