How to educate kids on money matters

Personal finance education for kids has not been too high on the priority list for schools or states, but that is now changing. Only 12 states require students to take a course about basic finances to graduate high school, but another 12 have pending legislation. Texas is the biggest and most recent state to mandate the requirement starting this fall.

The Federal government is also taking more responsibility for financial literacy. The Fair and Accurate Credit Transactions Act of 2003, which mandated new rights for a free annual credit report, also set up a 20-agency commission led by the Treasury Department to coordinate a personal finance campaign. Its first action was to launch a new Web site named Mymoney.gov  which offers personal finance advice and information. Its national strategy — which includes issuing various calls to action for industry, government and individuals — will be launched in April, which just happens to be Financial Literacy Month.

Even though the Mymoney Web site does not have specific information targeted to kids and teens, Dan Iannicola, the Treasury’s deputy assistant secretary for financial education, says his department already makes a concerted effort to educate kids in the classroom, partnering with visiting 20 states in the past year. “When we’re in the community on business, we’ll sometimes partner with a bank or credit union and visit high schools. We’ll give presentations on topics like credit cards, credit scores and how to manage both.”

But many financial experts say the lessons should start earlier. Chad Foster, co-author of Financial Literacy for Teens, said grade school is the optimum time. “Middle school is when they start amassing money and start thinking about what to do with it.  They should recognize the difference between needs and wants in 6^th grade so when they’re in high school with even more money, they know how to act on the difference.”

Nonprofits like JumpStart, the NEFE and Junior Achievement are trying to raise children’s grades in financial literacy. Junior Achievement’s Langella taught in the organization’s educational outreach program, JA Economics for Success, geared to teach middle-school students real-life lessons in personal finance. The program sends volunteers from the business community into classrooms once a week for six weeks to teach lessons in budgeting, credit and other financial topics, and then provides follow-up lessons and activities for classes to use afterwards.

”We talk about anything from getting insurance and budgeting to renting an apartment and buying a house," said Langella.

Leading by example
Still, like with most lessons, children should be learning the big ones at home. Parents need to lead by example, even if that means cleaning up their own financial act, said Foster. “It’s like smoking and telling your kids not to smoke. If you want to make them save, learn about investing and pay their credit card off every month, you need to do that too. If you do something different, that defeats the purpose.”

Teresa Froehle and her husband Gregory  of Centennial, Colo., are trying to set a good example for their three kids, ages 9, 12 and 15. Bills and balancing the checkbooks are frequent topics of household conversation.

"Money and bills are discussed every day in our family," said Froehle. "We’ve tried to instill the value of a dollar in them since they were four years old."

The Froehle children — Lauren, Leah and Andrew — all have savings accounts and put money in them on a regular basis. When the two daughters shop at the mall stores, they immediately head to the discounted rack, and even nine-year-old Andrew looks for his gym shoes on sale. Besides studying for good grades that will get them scholarships for college, they also work on the side — Lauren baby-sits, Leah dog-sits and Andrew earns an allowance for chores, much of which goes directly to his savings account.

September 11 and Doug Froehle’s downsized retirement benefits as a pilot for United Airlines, was the turning point for the way they viewed their finances. “Before then, we bought more or less what we wanted and thought if it as no big deal,” said Teresa Froehle. “But after September 11, we took stock of both our income and our lives and it made us more frugal. It also taught the kids a valuable lesson in life that things can change in a second.”

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