Where can my kids learn about money?

John W. Schoen • Profile • E-mail

This week, a Minnesota mom is worried that her kids aren't getting the education they'll need to manage their finances as adults. Though there are a number of organizations that can help, kids still learn most of what they know about money from their parents — the earlier, the better.

I have three children, 15, 13 and 10. I am concerned because they are not going to be introduced to managing finances in school until 11th or 12th grade. Way too late. Are there organizations available to educate them on this subject outside of school?
—Shari S. Roseville, Minn.

Unfortunately, personal finance is not part of the mainstream curriculum at most schools. Despite the increasingly complex financial products and services available to Americans, only a handful of states have moved to reverse the gaping hole in public education and financial literacy for young people.

In the past several years, dozens of states have considered bills requiring some form of financial education in public schools. But only nine states include personal finance as part of their high school graduation requirements: Alabama, Georgia, Idaho, Illinois, Kentucky, Louisiana, New York, Texas and Utah, according to a 2006 report from the National Association of State Boards of Education.

Meanwhile, nearly half of American kids leave high school without understanding how to save and invest for retirement, handle credit cards, or understand the difference between inflation and recession, according to a survey by the National Council on Economic Education, one of several groups working to improve financial literacy. Others include the National Endowment for Financial Education, Jump$tart and Junior Achievement.

These groups also provide materials to schools and community groups that are interested in setting up personal finance courses for kids. You might consider getting together with other like-minded parents or contacting your local parent-teacher association and approaching your school about teaching personal finance.

In the meantime, you can be a very important teacher and role model for your kids. They won’t admit it, but most kids are influenced heavily by their parents — even long after they’ve made it clear they won’t be caught dead with you at the mall.

If they’re not on an allowance, get them started. How soon? If they’re old enough to understand the impulse to buy candy at the checkout line, they’re old enough to understand an allowance. Make them responsible for as much as you feel comfortable. Have them set aside money for savings and regular donations to a charity or service group of their choice.

The more spending they’re responsible for, the sooner they’ll learn how to stick to a budget. It’s not unreasonable for a 15-year-old to handle most expenses, based on a monthly number you work out, beyond basics like food, clothing, shelter and medical costs. As an added bonus, you may find you have an easier time with your own budget. (No more “Mom, can you buy me these $100 jeans?”)

Expect them to make a mistake now and then; that’s how they learn. Avoid the urge to bail them out. If they must have something that’s beyond their budget, work out a loan — with a strict repayment schedule — to teach what it feels like to be in debt. Better in debt for a few hundred dollars — to you — that to hit adulthood and go on an “easy credit” borrowing spree that lands them in debt beyond repair. Based on the mail we get every week, the problem is widespread.

As they get older, show your kids how you pay the bills. Explain what a mortgage is. Help them find part-time work. The sooner they get a job, the sooner they have a personal stake in their budgeting. At the end of the year, walk them through the basics of a tax return.

If they plan to go to college, make it clear that they’ll have a stake in those costs too — either an on-campus job or some level of student loans that will give them a first-hand feel for debt — without burying them in loans when they graduate.

Most of all, teach them early about the predatory lending practices of the financial services industry, which is reaching younger into adolescence for new customers. Many college freshmen now pass a booth on their first day on campus, set up with the school’s blessing, offering credit card accounts — complete with a $50 “starter credit” just to them hooked on the habit of using the card. If your child is approaching adulthood and hasn’t figured out how to manage credit, make sure you get to them before the card companies do.

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