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I've read many articles in parenting mags, financial mags, etc about "teaching kids about money". What all these articles conveniently forget is that parents are supporting their children. My kids never really understood what the value of a dollar was until they had to pay their own rent, every month, buy their own groceries, every week, and so forth. You can have kids save their allowances, and later their earnings from their part-time, low paying jobs, but they don't really understand it until they have the whole enchilada in their laps. A six year old doesn't understand jack about investing; they are still thinking very concretely (most of them anyway).
I still believe teaching them early is a better option than what amounts to abdicating by saying that they won't understand it until they have full responsibility. That fact that parents do support kids is all the more reason to teach them the value of money as soon as possible. I agree that throwing a lot of conceptual, dull, theoretical information doesn't make sense, but letting them learn as a byproduct of doing does make sense to me.
Maybe a particular six year doesn't start investing right away. Maybe they are introduced to saving their money. That alone is an accomplishment given how many adults struggle with saving currently. And then that kid sees that by letting that money sit there in their account for a little while, they magically got a little more money. It might tweak their interest in learning how to get more, or at least encourage the saving habit. Or maybe there's something they want to buy. They are encouraged to save for it by watching the days count down and getting encouraging messages until they have enough in their spending account to buy it. These are things they can do on the site that I mentioned (ThreeJars) and that's why I like their approach. It's about introducing them to concepts in a fun way. You are correct that kids learn at different paces and the more they learn, the more parents can introduce to them. At least the family is talking about money.
Many adults today are intimidated by the Stock Market and investing because it's so foreign to them. Had they learned abut stocks, bonds, high yield accounts etc at some point, at least these would not be scary or embarrassing concepts to discuss as adults - or maybe even explore. I'm not prescribing that everyone follow a particular path when it comes to money. Some informed people consciously choose not to invest and take a different path but many miss out on opportunities to invest and grow money because they aren't informed and don't know how. It's a powerless choice and I believe in choosing powerfully, which requires being informed.
Add to that those that are in financial difficulty because they don't know how to manage what they do have. I believe that the principles of portioning and budgeting money can indeed be taught from an early age, especially if the kids have practical application. One of my friends told me recently about how his 9 year old son always asked for candy money from Mom and Dad without a second thought. When he was told it would be coming from his ThreeJars accounts and that they would adjust the amounts to reflect that, all of a sudden their boy became more thoughtful about how and on what he wanted to spend his money on. When it's from Mom and Dad, money is this expendable resource that grows on trees but when it's their own money, kids can become more thoughtful about their spending.That alone was enough enough of a lesson from Mom and Dad's perspective.
In this culture of celebrity, excess, spending and having at all costs, introducing charitable giving at an early age is something I support. With all the commercial messages kids are hit with, it's difficult to raise kids who are not materialistic and entitled. Encouraging charitable giving and kids actually seeing the results of their contribution can nurture that natural compassion that kids have. Parents will make the choice that they feel is right for their kids at the end of the day I guess, but in this climate especially, I support educating kids about finances, and the sooner the better. That's why I like the approach that Threejars.com takes. It's fun, practical application as opposed to just theoretical classroom or book approach. The idea being to have kids can learn without realizing that they are.
In many schools in Japan, they make students keep notebooks that detail what they spend their money on. Some adults (including a former coworker of mine) continue to do that after leaving school. Of course, that is a huge invasion of student privacy and wouldn't be allowed here, but there it is.
The one question I have in terms of educating kids on financial matters is just who will be giving them that information? Will they be getting propaganda from Goldman-Sachs, for example, as their texts since financial firms are so connected to local and national politicians? Will students be given historical background on American economics or will it be seen as "socialism" to criticize the behavior of our financial masters? Just where are you going to steer students in how they allocate their liquid assets? In other words, will separation between corporate America and the schools be possible when we have little to no separation between corporate America and our government?
Our school district has a mandatory finance class for high school students. They must pass a test as part of their graduation requirements.
I think we have done more to hammer the point home though. We told all the kids that we would pay for room, board, a car, and college. We don't pay for gas, we don't pay for trips to the mall, social activities, or dates. All three of them have had jobs since they were old enough to get working papers. There are times when I think they spend their earnings on silly things, but that is part of the learning process.
In general its a good idea.I can not believe how many adults cant write a check or balance it and dont understand the long range reprecussions of a credit card.However alot has to do with morals and values.
In general its a good idea.I can not believe how many adults cant write a check or balance it and dont understand the long range reprecussions of a credit card.However alot has to do with morals and values.
True, it also is often the result of the effect on the human psyche of the crushing negativity of poverty on the human spirit and body.
I still believe teaching them early is a better option than what amounts to abdicating by saying that they won't understand it until they have full responsibility. That fact that parents do support kids is all the more reason to teach them the value of money as soon as possible. I agree that throwing a lot of conceptual, dull, theoretical information doesn't make sense, but letting them learn as a byproduct of doing does make sense to me.
I see your point, and I have no problems with kids having to earn their own money, learn to save, etc. However, a six year old can save HIS money for a transformer or whatever because his parents are supporting him. He doesn't have any other expenses. He may understand saving for something you want (which is a good thing), but he certainly doesn't get the "big picture". That is even true when s/he is 16. The way to learn about turning out the lights so you don't run up the electric bill is by having to pay the electric bill.
I believe most youth are woefully ignorant when it comes to managing their finances when they leave home. I come across people in my profession everyday who have little or no understanding about managing their personal finances when it comes to such things as interest rates, saving, investing, buying a house, buying a car, importance of credit scores, credit cards, different types of debt, debt implications, budgeting, bankruptcy etc. It's obvious that they are not learning this at home. What this leads to are serious financial mistakes being made by many people that haunt them the rest of their lives and have a negative impact on their quality of life and standard of living. Why isn't it required that personal/family financial planning be a mandatory course for high school students? I'd be interested in hearing some feedback. Thanks.
Call me a conspiracy theorist, but I dont think they want you to know.
Very interesting story when you dig under the comments. Go to "John Jordan" on page 5 of the comments, and you get the answer.
Direct quote,
"I know a lot of people will say, "tough! You're a jerk. You are responsible." Well, I beg to differ. As a teenager with no knowledge of finances, I was duped into signing a loan as large as a mortgage. I trusted what the financial aid office told me. I was a fool, but I can't go back and change that. They took advantage of my inexperience and took me for a fortune."
They want you as dumb as possible, so they can dupe you into signing loans as large as mortgages.
I think financial planning should focus on competency, not just dull theoretical information. Actually calling up a real estate agent. Viewing a home. Looking over documents. Understanding mortgage terms. Maybe a test 10 days later, do you still want the house? Was it a good deal?
On the first day of the school year in september, let kids get into debt. Then watch the interest accumulate over the months. Then see what the balance is by june. Start that in the 9th grade, and by the end of 12th grade, the results might sink through. And if you don't know how much interest you just paid, you fail.
I think conceptual information, or watching compound interest on a video, it doesnt work. It doesnt really sink in. It'd be nice to know what being buried under debt feels like, before getting into it
The stock market, and investing. It should be more intertwined with a foreign language, history, world affairs. Combine all that. And a book like, "The World Flat". Then you've got better tools to look at investing. Better than trying to apply abstract information everywhere. They might end up understanding investing in China better than their broker.
Most of things I learned about econ or finance in highschool or college was too americanized, and looked at through a very narrow lense of the last 20-30 years. We learned about the great "FED", but the US has had central banks before. If you start learning that the FED is "special" or Greenspan has special powers to control the economy, then you start believing Bob Woodward's "Maestro". Greenspan is the maestro! But you miss the whole picture (the US economy subsequently collapsed, and the whole game is shifting to asia).
Seperate celebrity and pr from real nuts and bolts information. Don't make any of these people celebrities or god like.
A investment philosophy is grounded in Modern Portfolio Theory. Use this knowledge of market returns and risk to develop an asset allocation that fits your situation. Asset allocation has been shown to be the single most important factor in long term performance. Examples of asset classes used include large cap stocks, small cap stocks, value stocks, foreign large and small cap stocks, emerging market stocks and bonds. While you must take some risk to achieve a given return, by using a diversified allocation you can avoid taking unnecessary risk. I believe sticking to an asset allocation over a long time and not attempting to guess where the market is headed is the right way to invest.
They don't want you to be literate in finances! Why would they? Then you can't go $23,200 in debt (average) for a watered down college degree. Only 47% of highschool students went to college in 1973. Now 70% do.
-Every party is in on it. The mainstream media (time magazine), the baby boomers, the government, the colleges, the highschools, the "counselors", "helpers". It's a feeding frenzy on the financially inexperienced.
The average highschooler in America has no idea what it's like to be in debt. What's the most that a 16 or 18 year old borrows? Do they understand compound interest? Do they understand how long it may take to repay large future loans? Do schools teach the ramifications of going into too much debt?
What's going on is a modern tragedy.
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Never to early to start
