80% of American adults say they could use some help with their finances, according to a Consumer Financial Literacy Survey. Does that surprise you? At what point do we learn how to manage our finances?
Did you have Finance 101 in high school? I didn’t. In fact, most people didn’t.
We turn to finance books, magazines, and personal finance blogs like the one you’re reading, because we don’t have any other way to learn how to manage our money. People are left on their own in this area. Why is that?
Why Isn’t Personal Finance Taught in School?
Other than a brief explanation of how to balance a checkbook, and a likely confusing demonstration of how to create a budget, personal finances aren’t covered in the school system. And why should they be? Our teachers are struggling as much as anyone.
That’s actually one of the reasons finances may not be taught in school: there aren’t enough teachers qualified to teach the subject. That along with several other reasons is why you never learned the basics in school, and why we’re forced to seek financial education on our own.
When schools try to bring in a personal finance class, there are often disputes over what should and shouldn’t be included in the curriculum. Which method of investing works best? How should you budget? How [and how much] do you need to save for retirement? I think we could all agree that there is enough common ground to foster a finance class, but it often doesn’t make it past this hurdle.
It doesn’t have to be this way for future generations. We can teach our kids, and pass it down for generations to come. You can be the change in your family tree if you come from a history of poverty. Ultimately, it’s up to us to set our children up for financial success.
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Get Your Finances in Order
“More is caught than taught.” –Rachel Cruze
Our kids are constantly learning from us, whether we like it or not. What we tell them matters very little, if we do the opposite of what we say. Therefore, the most important first step to teaching our kids about money is to get our own financial house in order.
There’s no shame for being in debt, or financial mistakes you’ve made in the past. What truly matters is right now, and the direction you’re headed. Let your kids learn from your financial mistakes. Be open and honest with them about the financial blunders you’ve made. Use your mistakes as teaching opportunities.
If your kids see you digging your way out of debt, they’ll likely want to avoid it all together, and they’ll be able to appreciate your diligence.
You don’t need a perfect handle on your money before you can start teaching your kids, but you should be working towards financial order. Show your kids the process you’re going through. Whether you’re going through a difficult time or slowly building a nest egg, you can involve your kids in the process.
The idea that our finances should be private, and that our kids shouldn’t see them at all, can be dangerous. It’s this idea that leaves so many children growing up with no financial knowledge whatsoever.
For example, if your kids don’t know your annual income, how can they set an expectation for their own? You decide what to share and what not to share, but leaving them in the dark won’t teach them anything.
Find Teachable Moments
Finding teachable moments is easier than you may think. The more you do it, the more you’ll see that these moments are all over the place.
Don’t just go to the bank with your kids, show them what you’re there for. Show them how you would open a new account, and how you’re taking money out of your account. You’d be surprised how many kids think the bank is actually giving you money when you make a withdrawal. Help your children understand that you can’t take money out of the bank, if you don’t have it in the bank. Now credit cards… that’s a different story.
Any store with something your child wants—which, let’s be honest, is practically any store—is a good place for a money lesson. My wife and I have set a rule that our children are not allowed to ask for anything when we’re inside a store. We want to eliminate the constant desire for impulse buys. We can always tell if they truly want something when they’re able to remember it after we leave the store.
When you go to the grocery store, take your list and stick to it. Let your kids see you stick to your list. Let them see how you created a list specifically so that you wouldn’t buy any extra items. If you do decide to buy something that’s not on your list, tell them why. They need to see you making spending decisions.
It’s also important to show your kids bad spending decisions (hopefully not yours!). The best place for them to see this is at expensive places like amusement parks, carnivals, fairs, and heavy tourist spots. These are great places to find expensive junk. Show your kids how many people are wasting their money, and more importantly, how they don’t need to fall into that trap.
Don’t steal their ability to buy anything, or the fun associated with these places. Rather, show them how you don’t need to spend all your money to have fun.
Invite the Internet to Teach
Good money habits may not be taught in school, but they are taught online. There are more and more resources being added every day.
Here are a few great websites to teach your kids about money:
- CFPB – Resources for you to teach your kids about money
- Biz Kids – All kinds of lessons, tools, and games for you and your kids
- Freedom Sprout – Articles that help you teach your kids about money
You can always head to YouTube when there is a specific concept you’re trying to teach your kids. YouTube knows everything.