Teaching Your Kids About Money – If You Don’t, No One Will

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As parents, the education of our children is one of our most important goals. Education not only teaches children how to earn a living one day, but also how to get about in society. Unfortunately, there’s one gaping learning hole in that education process: money. Very little of the time that kids spend in school…

As parents, the education of our children is one of our most important goals. Education not only teaches children how to earn a living one day, but also how to get about in society. Unfortunately, there’s one gaping learning hole in that education process: money. Very little of the time that kids spend in school – at any level – will teach them how to deal with money. The bottom line is that if you don’t teach your kids about money, no one will.

Why is it so important for you to teach your kids about money?

They Won’t Learn About Money in School

Kids will spend 13 years in the school system, kindergarten through high school. While they’ll learn all about higher level math, poetry, protecting the environment, and high minded scientific theories, by the time they finish, they probably won’t learn how to do something so much more fundamental, like balance a checkbook.

Education purists may argue that the true purpose of school is to expose children to theories in an effort to stimulate their problem solving skills. But, I think we generally count on the schools to do much more. Children are taught how to get along with others in appropriate ways (like bullying policies), their own reproductive capabilities (sex education), and even the importance of punctuality.

But conspicuous in its absence is financial education. Managing a bank account, understanding the importance of investing, compound earnings, the time value of money, the uses and implications of debt, and even asset allocation are all issues that will come up in every person’s life. Yet the amount of class time devoted to financial matters is painfully small, if it even happens.

They Won’t Learn About Money in College

Unless Junior takes a personal finance course, he’s unlikely to get a financial education in college either. This despite an investment of four or more years, and tens of thousands of dollars in tuition and fees. It’s hardly a surprise then that so many young people graduate from college deep in debt, and often ascribe their situations to complete ignorance. Given the lack of education in the area of personal finance, that seems to be a legitimate claim.

You would think that somewhere between kindergarten and undergrad, there would be at least some semi-regular course curriculum in personal finance. Alas, there isn’t. Your children won’t learn about money in elementary school, middle school, high school, or college.

The moral of the story: don’t count on your kids learning about money at any level of the education system.

They Won’t Learn About Money on TV

According to the A.C. Nielsen Company, kids watch TV for an average of 3.5 hours per day. That’s roughly half the amount of time that they spend in school on a typical weekday. It amounts to about 24 hours per week, which means that TV has a significant influence on what kids are learning – or not learning.

Unless the child spends much of his or her TV time watching financial programs, it’s very unlikely that they are learning anything about money at all from TV.

Or at least anything positive.

TV is probably a major negative influence where money is concerned. There are two undeniable impressions that kids are likely to get from TV:

  1. Everybody is rich, or are at least highly likely to always have as much money as they need for whatever it is they want to do at that moment, and
  2. Except for criminal activities, the whole process of earning a living is highly de-emphasized in the lives of people on TV.

None of that is conducive to a child learning anything constructive about money. And none of it will prepare a child to have a healthy view of money as an adult.

The School of Hard Knocks is a Tough Neighborhood to Learn In

One day, Junior will leave the family home, and the familiar surroundings of high school, and go off on his own. Whether it is to live out on his own, or to go away to live at college, he may be taking a look at his first serious experience in dealing with money on his own. But none of what he learned in either school or on TV will prepare him to manage his money intelligently. This is a major reason why so many young people are in serious financial trouble so early in life.

It’s probably true that the best way to learn about anything – including money – is through real-world experience. But those lessons can come at a heavy price. Accumulating six figures in unforgivable student loan debt, or being forced to file bankruptcy at age 25, are painful ways to learn how money matters can go wrong.

Learning About Money Takes Time – You Have at Least 18 Years

Given that your children will not learn about money from any of the places where they spend the most time (school and TV), it’s important that parents are extremely proactive in teaching them. It’s not an easy thing to do, but one advantage that you have is that you’ll have 18 years to do it.

Many parents try to shield their children from money issues, including household financial concerns. But that just leaves the child unprepared as an adult. Financial struggles are likely to touch your child’s life at some point, and any experience that she gains as a child can only help her throughout her life.

You can teach your children about money using a variety of strategies:

  • Give them a small allowance early in life. Let that the their absolute spending limit for non-essentials.
  • Tie the allowance to chores. That way the child will connect income to work. (Very important!)
  • As your child gets older, certainly by middle school, have them pay certain expenses. For example, if your child has a cell phone, have her pay a couple of dollars per month for the service. This will help teach her that everything that she has or uses must be paid for.
  • Set up a savings account, and have the child put at least a little bit of money in each month. As the account balance grows, and the child sees it, the lesson will be learned.
  • If you have an investment account for your child, spent some time explaining and analyzing with your child as early in life as they seem ready to handle. And like a savings account, the lesson will be learned as the account balance grows. They’ll likely express an interest in the mechanics of the process from that point.
  • If you’re saving up for a common family goal, such as a summer vacation, have the child contribute least little bit of money. That can expose the child to the all important “we” component of money.

The Bottom Line

These are just some general suggestions. You can use any kind of examples that you like, or think that your child is ready for, to teach your kids about money. But the important thing is to implement some sort of training process with your children. After all, if you don’t teach your kids about money, no one will.

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About Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

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  1. [email protected] says

    Couldn’t agree more Kevin. Based off of my personal experience, most of my knowledge on money was all self taught through experiences I had. I think one of the biggest things missing in schools is the teaching of personal finance to students. Many students graduate from school with little to no knowledge on what to do with their new salaries.

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