This month is National Financial Literacy Month in the United States. The goal of the month long series of events and articles is to help raise awareness and action towards helping our youth develop better financial knowledge and skills. The urgency to teach kids financial life skills is greater than ever before because of the increasing ease with which they can spend money (and go into debt), get credit, and as every parent is well aware, due to the expensive items they desire to purchase day in and day out.
The Council for Economic Education in New York asked me to write an article addressing children's money management and I'm thrilled to share it with you here. This is a topic that truly impacts all areas of our children's lives and well-being as they grow and mature.
I hope you find the simple and effective concepts in the article to be valuable to your family as you discuss and teach your children how to manage money effectively in the days and years ahead.
GISS It: Financial Life Skills Can Help Our Children and Our Society
“As parents, we are automatic educators, and we want our children to learn the skills they’ll need to thrive and reach their full potential in life. This is true for parents around the world. With the financial industry and global culture changing as rapidly as they are today, it’s easy to see that our children need guidance; current, effective, honest information, that has their best interest and future well-being at heart.
The Lessons Must Have These Key Elements
These core financial life lessons must involve a combination of… (read entire article)
Moms and dads, you're amazing. Give yourself a moment to just feel good knowing all the incredible things you do for your children. Every day I am humbled by the stories I hear and see of parents going above and beyond for their family, and for others. It's very inspiring, thank you.
Now to my blog post.
Spring is here, the flowers are beginning to bloom and the sun is shining - sometimes. This is the time of year many fortunate young children begin soccer practices and other fun outdoor sports.
Learning a Sport
When you think about it, learning a sport always starts with basic skills, which are built upon with practice over time. Whether you're talking about baseball, football, hockey, dance or golf, each sport involves dozens of skills that must be learned and mastered before they become habitual.
Money skills work the same way, and it is much easier to approach the topic when we think of it more from a coaches perspective. Personal financial success is not about academic theory, being an investment wizard or complex mathematics, it's about the simple yet critical decisions we make each day and the planning and understanding behind those decisions. Learning to make good financial choices requires hands-on experience so children can learn from their successes and disappointments, and apply that knowledge in the future.
Why I believe teaching kids money skills should be like teaching them a sport:
*Both consist of basic skills, or building blocks that need to be practiced and should ideally be mastered before advancing.
*An individual must practice the skills and gain hands-on experience themselves; no one else can do it for them.
*It's easier to start learning the skills at a young age – there are no bad habits to deal with and no fear of "I can't" or "I'm not smart enough." Kids don't mind going through that awkward learning stage like teens and adults do.
*A child has the opportunity to learn from their mistakes so they can improve over time and with practice. "Success breeds success."
*Developing personal and financial responsibility increases the feeling “I’m capable,” and helps increase the child’s self-esteem and overall confidence. It also significantly decreases the attitude of entitlement.
* the child learns to execute their values based decisions under pressure, whether it be from peers, the media or some other source.
Rather than feeling intimidated about all the theoretical concepts we need to teach our children about financial education, we can give a big sigh of relief knowing that what we really need to do is teach simple, age-appropriate, real life skills during daily life.
No driving required!
Repetition, personal relevancy and consistency are key factors to learning in a way that creates good habits, not complexity. Keep things simple and fun, this will lead to memorable learning experiences. The great thing with teaching financial life skills is that, unlike athletic lessons, teaching our kids these skills is free and they can be easily incorporated into the daily schedule - no driving required!
These are life lessons that our children truly need to lead happy, fulfilling futures. We make the time to take our children to athletic training; we need to be equally dedicated to creating daily conversations and practice times to learn about life success skills including money management. A few minutes a day can significantly impact their long-term financial wellbeing and success.
Please feel free to share the fun ways you've found to teach your children financial life skills.
Click here for resources on the Zela Wela Way to helping your children learn financial life skills.
Please join us this Wednesday for the Webinar:
"How To Prepare Your Children For Financial and Life Success in Today’s World" 1 pm EST.
McKenzie Slaughter from Beauty and the Bull magazine will be hosting this presentation for parents and grandparents. The content I present includes:
Why there is such urgency for parents to teach children money skills today
Common myths about kids and money
When exactly to start and why the timing is so critical
How to teach your children financial skills effectively (and make it fun and memorable!)
Damaging mistakes every parent should avoid
The Mom Effect
The most important character trait in children for predicting future financial success and how to enhance it
We are going to cover some tips that can literally transform your child's future.
Yesterday was our first kids yard sale and lemonade stand of the year and it was as exciting as always. After one big sale early in the morning, the kids wondered why sales were so slow and it was a long wait until the next customer. Their patience was rewarded though, and things started to get busy after lunch. They were given some big tips for the SPCA and got plenty of practice adding numbers and making change. Fun was had by all!
Now to the post for today:
Moms are Critical to Improving Financial Literacy in Our Society
Financial literacy is a life skill - and like any skill, it needs to be learned and practiced. No one is "born with it." Two recent polls highlight the importance both parents play in their children’s financial education and show mom as the most influential parent. Children tend to go to their moms first with money questions. When you combine this information with the fact that a person’s money “wiring” occurs during the formative years in early childhood, a period when moms tend to spend the most time with children, it’s easy to understand why mothers play such a powerful role in their child’s financial future, especially their daughters – the future mothers of the next generation.
When we consider this significant information and add in the data showing that women influence 85% of household consumer decisions, the importance of a mother’s role in basic financial habits and attitudes really comes to light.
#1. A poll of 1,004 adults by CreditCards.com found that 26% of those surveyed named Mom as the most influential person when it came to shaping their financial habits. The numbers were close and dad clearly plays an important role too. He ranked as the second most influential member of the family with 21% of those polled giving him the #1 spot.
Dad's influence turned out to be greater for sons (25%) than for daughters (18%). The gender bias was similar for mothers: their daughters were more likely to identify them as key influencers of personal finance habits (30%) than their sons (23%).
Bottom line – the kids are watching mom and learning by observation whether the “lessons” are being taught by dad or not. This is even more pronounced in low-income earning adults ($20,000 to $29,000 a year) where 37% of kids said mom influenced them more than the 24% of high income earning adults (than $50,000 a year.)
#2. Angus Reid, on behalf of TD Bank surveyed 1,637 adults in the Eastern United States. There is no doubt that the recession has made a big impact on families and financial literacy. The survey found that 55 percent of families are discussing money with their children more often. Unfortunately, only 33 percent stated they were setting a savings goal.
Moms and Dads – How Their Financial Lessons Differ
*Only 34% of the adults surveyed rated their financial knowledge as "good" or better.
*Dads were nearly 10% more financially confident than moms.
*66% of dads commented that they regretted not discussing money with their children more.
*52% of moms feel that it is their responsibility to teach their kids about financial management.
* 43% percent of families polled are not following a monthly budget. Even more interesting are the parental disparities in the reasons why:
*35% of dads and 22% of moms feel they do not need a budget
*19% of moms and 12% of dads commented that they didn’t know how to create one because they are too complicated
“Every day” Financial Lessons
- 81% teach children how to count money
- 70% teach money lessons during shopping trips
- 70% teach about saving money in a piggy bank
- 52% provide an allowance
- 32% help the child set a savings goal
Bottom line –Moms tend to have more “hands-on” time with children in general and clearly play a vital role in their fundamental financial education. This critical teaching time will have a significant impact on the individual child’s future financial well-being and ultimately to the financial status of our entire society. The vicious cycle of financial illiteracy can be broken – and it needs to start at home.
If you found this interesting and would like more information and resources about how to teach your children financial life skills, go to http://www.zelawelakids.com
The Last Gold Coin by Daniel Britton
The Last Gold Coin is a lovely fairy tale instilled with important messages. It tells the tale of a Prince whose act of generosity starts a chain of events to save a kingdom. Young children love to hear about people helping other people and my children definitely enjoyed this particular scene. Stories of kindness warm the heart and make everyone feel good inside. This story certainly has that effect. A number of other important subjects are woven into the enchanting storyline including the importance of working together and the fact that people can create their own circumstances and successes.
The book provides a wonderful introduction to the concepts of money, personal responsibility, gratitude, and the importance of continuous life-long learning.
The Financial Fairy Tales series of stories provide a fun, magical way of communicating key values and financial information that will benefit children as they grow and mature.
About the author
The Financial Fairy Tales - is the concept of UK based author, educator and speaker, Daniel Britton.
Daniel spent his early career in banking and financial services before 12 years as a teacher and school leader. Recently he has specialised as an education consultant, writer and speaker on money matters.
"There appears to be a lack of financial education and understanding in most education systems of the developed world" says Daniel. "By introducing these essential concepts to young people at an early stage we are sowing the seeds for better awareness and decision making later in life".
For more information visit the Financial Fairy Tales
If you are a parent, you are already well aware of how challenging it can be to explain to a young child why they can’t have something.
Acknowledging your child’s desire respectfully doesn’t mean you have to buy them the item they are requesting. Wish lists are a fantastic, simple way to help your children learn to make choices and prioritize while practicing their literacy and numeracy skills at the same time.
For our family, the creation of the wish list started almost four years ago when I read a specific story in How to Talk so Kids Will Listen and Listen so Kids Will Talk by Adele Faber and Elaine Mazlish (this is definitely one of the best parenting books I’ve ever read.) One of the examples in the book talked about how a family successfully dealt with a full blown tantrum in public. The family had gone to a museum and like many site seeing places do, the museum had a gift shop that the family had to pass through when they exited. Unfortunately the four year old son wasn’t able to cope with not getting the dinosaur he wanted and to his parents horror, threw himself on the ground screaming. As people watched, the mother had the brilliant idea to pull out a pencil and paper and start writing. She wrote down what he wanted as she spoke with him about it and he calmed right down. This story stuck with me, I thought it was quite interesting and knew it may be very useful in the future!
Fast forward two years. Max, my five year old son was three at the time, and had seriously entered the “I want” stage. The problem was he literally said “I want that” to every toy he saw because he didn’t understand the concepts of time, space or money! It’s understandable that little children want all the wonderful fuzzy, cute, fast, fun toys they see in advertisements and stores but we have to teach them delayed gratification for their long-term well being and our own sanity!
Why the excitement often wanes after a purchase
As is discussed in Your Money and Your Brain, by Jason Zweig, anticipation of a reward is very powerful. He quotes neurologist Emrah Duzel as stating “The anticipation of a reward is more important for memory formation than is the receipt of reward.” This helps explain why so often we see children who wanted something “really badly” and barely pay attention to it after they receive it. The fun was in the anticipation and often the toy doesn’t live up to the thoughts and dreams in the child’s head (same goes for adults!)
So, how was I going to deal with the “I want” stage? I began thinking about the story I had read with the boy at the museum and the powerful calming effect of his mother writing out his desire. I subsequently created a fun looking “wish list” so that we could print out what the “toy of the day” was, why Max wanted it, the price and so on. This way Max knew he was being listened to and there was no upset, he was excited to see the name of the toy on the piece of paper! Secondly, he often forgot about asking for the toy once it was printed on the sheet. Finally, if he continued talking about the item over a time period of months, I knew it would likely make a pretty good gift for his Birthday or Christmas, because it was something he had thought over. It was also a lot more time efficient and enjoyable to write down the name of the toy and discuss it briefly than to try to explain why he couldn’t have it right then or later that day.
Why the wish list works
Acknowledging a child’s feelings in a respectful way is crucial for keeping things on an even keel and definitely makes the atmosphere much more pleasant. Discuss the item and help your child write the name of it down. It will make them feel better because their needs are being addressed in a positive way. Parents who use wish lists tend to find their children become more understanding and realistic about wanting things. Over time, the children think through why they want something and the value of it, as opposed to just asking for it because it looks neat. These steps increase the child’s decision making skills and they learn to prioritize. As children get older, the wish list acts more as a “goal” sheet of things they can save for and achieve on their own.
Please feel free to download the Zela Wela Wish List. I hope you find it useful!
If you like this information, you may also find my new book a valuable tool to read with your children.
The Zela Wela Kids Learn about Needs and Wants helps a parent teach their children a number of important concepts. In the story, Jack, Emma, Mom and Dolly, the dollar fairy, take a trip to the grocery store where together they learn important life lessons like:
* the difference between needs and wants
* why using cash saves you money
* why an “ATM” doesn’t endlessly spit out money
* the importance of tracking your spending
* what a bank account is, and
* how a wish list can help you make good buying decisions and prevent “I want ...” tantrums.
It's interesting (and often disconcerting) to watch teens and pre-teens these days with their rapid fire texting and continuous communication. I read a fascinating article last week in Newsweek called “I Can’t Think!” It really got me thinking (pun intended) about the challenges our younger children will face in the years ahead when making decisions amidst their busy, highly stimulating teen lives.
The part of the brain responsible for decision-making and the control of our emotions is called the dorsolateral prefrontal cortex. Evidently, it can, and frequently does, go into overload. Studies have shown that when subjects were given continuous information on a topic, there comes a point when the activity in the dorsolateral PFC essentially shuts down and people begin to make stupid decisions. Not surprisingly, their emotions then escalate skyward.
This fact has been proven to impact people's decision-making effectiveness in a variety of ways, including decisions made around the topics of finance. In a 2004 study, researchers at Columbia University found that when people were given more and more choices for their 401(k) investment plan, the participation rate fell significantly. People became overwhelmed and many chose to make no investment at all.
Here are a few key points from the article that will very likely impact our children:
*Too much information can lead to bad decisions because the brain goes into overload
*Constant data influx prevents our subconscious the necessary time to make sense of the information we’re receiving (thus inhibiting “instinctual” knowledge from providing input)
*The world is demanding quick decisions over good decisions due to the increasing number of decision that need to be made
How does this pertain to our children and the need for financial literacy?
When you consider something as important as being able to think through a decision effectively, especially financial decisions, this research information implies the importance of instilling good values and the basic fundamentals of handling money while children are young enough to “take it all in.” They need to know the difference between a need and a want, what good value is and in contrast, what is a waste of money. By learning these basic concepts, they develop a framework within which they can make their decisions today and in the years ahead. As parents, we teach our children about dangers and how to make decisions about safety, how to care for themselves and how to be kind. We also need to make sure they are armed with the necessary information to make good financial decisions from well developed habits and clear family values.
The financial literature shows that children tend to develop their “blueprint” towards money and their habits with money by the age of 13. Children are constantly learning by observation whether we are actively teaching them how to handle money or not. And, like it or not, young children are much more likely to listen to us and spend more time with us when compared to a teenager. This time together provides the opportunity for lessons to be learned, practiced and repeated - all necessary factors for effective, long-term learning. The early years are the time to take action when the risks are low, before credit and debit cards become a part of daily life.
Start your child's financial education now. Click here to read the article "How to be an Effective Money Teacher to Your Kids."
I was speaking with a lady in a store yesterday who commented on me paying cash for my purchase (she said it doesn’t happen very often.) I replied that I began using cash again several years ago for two reasons: to help my children learn about managing money and so I would manage my money like I used to when I used cash all the time.
Is it important to use cash in front of our children? Yes, and here's why:
1. It’s very difficult to learn about something you never see. Children can’t learn to be good money managers (and avoid debt when they are older) if they have no concept of a financial transaction. It needs to be real, they need to live it. Experience is critical to learning anything effectively. This is why allowances are popular with many parents; it’s a tool for teaching money management.
2. The development of self-discipline is critical to becoming a financially responsible adult. If a child is given every item they want, they will never have to plan or set goals. They also won’t experience the joy and pride of achieving their goals. Delayed gratification is an essential part of developing the self-discipline and self-control necessary for long term goals in the future.
3. They learn to count money and make change. Many pre-teens and teens find it challenging to make change these days because they grew up witnessing only “plastic” transactions. This group of young adults didn’t see cash change hands very often or have the opportunity to do the adding and subtracting necessary to learn to make change quickly.
4. Cash purchases tend to be more carefully thought-out and less costly. An MIT study showed that people tend to spend up to 20% less on items if they pay cash. This involves the emotional side of us; it’s harder to hand over our hard earned cash. "Credit cards are insidious," comments Associate Professor Prelec, "because they disconnect the consumption transaction, which is pleasant, from the payment transaction, which is painful. The "moral tax" gets blurred with credit cards. When you’re consuming, you’re not thinking about the payments, and when you’re paying, you don’t know what you’re paying for."
5. A parent is less likely to overindulge their children if they use cash. Dr. Bredehoft and his team at the University of Concordia have shown the powerful detrimental effects overindulgence has on children, including after they become adults. Using cash can help prevent this from happening.
6. Your money “blueprint” or personality is said to develop by the age of thirteen. This blueprint affects a person’s attitude towards money and their spending and saving habits. Therefore, whatever a child learns about money and its management before the age of thirteen will affect the rest of their lives. The development of a person’s blueprint early in life is directly affected by the people of influence in that person’s life, most often family and friends. Habits are powerful, we want to be sure we are instilling good ones.
7. Repetition is important for learning – incorporate money lessons using cash regularly into your family’s daily life. Whether it’s at the grocery store or discussing what your child is saving for, look at these moments as wonderful opportunities to help your child develop a vital life skill.
The bottom line
Using cash in front of your children is a great financial education for them for numerous important reasons. Avoiding debt in adulthood has a great deal to do with developing good money habits as a child. With good habits in place, the vicious cycle of over-spending and borrowing is less likely to ever start.
The benefit to you
While it may seem like a big deal to change your habits and begin using cash, you will feel great knowing (and sometimes literally seeing) your children learn the basics of handling money effectively. You are giving them a gift that will be of great benefit in adulthood. You’ll probably also save a couple of thousand dollars a year, I know I have.
Ready to withdraw some cash and start the learning fun?!! Let me know how it goes!
theritters @ flickr
Young women need to be given advice about the basics of personal finance just as much as young men do, but unfortunately they often miss out. If you have a pre-teen or teenager in your life who you would like to help guide down the path towards financial independence, here is an article that briefly discusses some of the key topics. Some points included are:
1. The importance of understanding that they can control their life and their successes by taking action.
2. They don’t need to be a math or investing genius to build wealth.
3. They should divide all income into Give, Invest, Save and Spend categories as they receive income.
Read full article: Criticial Financial Life Skills for Our Girls, Focus on Women Magazine, Jan/Feb 2011 pg. 29
Garage Sale Princess by BarGal @flickr
One of the most frequent questions I get asked by parents and grandparents is, "why is it important to start teaching children about managing money?" Then they often add, "can't we just let them be kids?"
I absolutely believe in letting kids be kids, but if you think they aren't aware of money or aren't learning your money habits, think again. They're learning all the time, just as they learned to walk and dress themselves, they are watching you and learning how to manage money. The stats show it. Most children go to their parents first for financial advice but unfortunately; most parents don’t feel comfortable giving financial advice.
Many schools still don’t have comprehensive financial literacy programs, and often the schools who do teach financial education begin the lessons later than they should. The research shows that people develop their attitudes towards money and their habits with money by the age of thirteen, so starting early is important.
Parents want their children to have all the life skills they need to live happy and fulfilling lives. Financial literacy is one of those skills as the current recession clearly demonstrates. Children with a good financial education will have an advantage in life because it will help them make good decisions throughout their lives. Parents don’t need to feel like they have to be a financial experts to help their children learn about managing money. The first step is committing to take action. A person doesn’t have to know all the answers up front.
When my daughter Natasha was four and a half and my son Max was one I asked myself, “What lessons should we be teaching our children about money?” This question ultimately led me to create my Zela Wela Kids book series. During my research for the books I came across a few easy tips that can help parents begin the critical task of teaching their children how to manage money:
1. It is invaluable for children to learn the habit of allocating their earnings early in life so that it is second nature for them as they reach adulthood. As we all have learned, breaking a habit is very difficult. It’s very beneficial to our children if we can get them off to a good start and help them develop good habits at a young age. Teach them to divide their gift money, allowance and earnings for odd jobs etc. into: giving, investing, saving and spending categories. This is the most powerful concept for building wealth according to many leading financial authors including Robert Kiyosaki, author of the Rich Dad Poor Dad series and T. Harv Eker, author of Secrets of the Millionaire Mind. The first book in my series for children, The Zela Wela Kids Build a Bank focuses on teaching this concept because I also believe it is very important for everyone to learn. Each category plays a very vital role in your child’s understanding of the various things money can be used for. As they place their money into the bank’s sections, it is a wonderful opportunity to talk to them about how they would like to help others, what they are saving for and so on.
2. Use cash in front of your children, it’s hard for them to learn good money habits if they never see what it is. Using cash will also be good for you– a study by MIT researchers found that people were willing to pay up to twice as much for a product when paying with a credit card and typically paid 20% more for the same item. If you use cash, you’ll spend less because you’ll feel more emotion when you hand over the money and you are therefore more likely to make a wise spending decision. This is a valuable teaching moment because your child will see you considering your buying decisions and not just “throwing down the plastic” mindlessly. Remember, your children learn by watching you so even if you aren’t discussing money with them, they are learning by observation.
3. Speak positively so your children don’t develop a negative attitude towards money, if they do, it will be very hard to change. As T. Harv Eker discusses in his book, your money “blueprint” is set during childhood by the people who influence you. Rather than saying “we can’t afford it” try saying something like “how do you think you might be able to earn the money to buy that? Let’s try to think of ten ways.” This will encourage them to work on their problem solving skills and help them use their imagination. If they really want to save for something special, they will be motivated and inspired to work for it.
If children are allowed to handle money and learn from small mistakes made at home when they are young, they will be less likely to make poor decisions with devastating financial consequences when they are older. As children learn to make good decisions, their successes create more self esteem and confidence and they continue to set and achieve larger goals for themselves. This cycle is a very important part of personal growth and development and parents can help encourage it.
Your children deserve to have the tools they need to pursue their goals and achieve their dreams. Managing their money wisely along the way will help them create the opportunities to do just that.