Few would argue that financial literacy is an important life skill, however currently only Utah, Missouri, Tennessee and Virginia require a personal financial literacy course for all graduating seniors. While this is a step in the right direction, we need to start implementing financial education earlier with children. Providing guidance and a solid structure on relationships with money, and helping them develop financial skills and habits, will serve them throughout their life.
Typically, around age four, children start to show an appreciation of the basic principles of money and value. Signs you can look for to help you determine if a child is ready to grasp financial conversations are:
1) Does your child grasp the fundamental concept of ascribing value to a symbolic instrument, such as coins, bills, and even toys? If yes, the child is ready to talk about how an item is purchased with money and how many coins or dollars it will take to purchase something. If this is a conversation a parent is having on an ongoing basis, the child begins to understand the relationship between money, goods and value.
2) Does your child understand the principle of growth over time? For example, do they understand that individual coins placed in a piggy bank accumulate over time? If so, the child understands the relationship between time and growth.
3) Does your child understand the basic relationship between money, wealth and lifestyle? Around age 4, kids start to notice that the people in their lives lead different lifestyles relative to their financial position. This is a natural observation, and indicates an understanding of the impact money can have on people’s lives. This is not a question of values about wealth, but more of a test to see if kids understand the relationship between money and lifestyle.
4) Does your child understand the simple mechanics of currency, (such that five of one coin can have the same value as one of another, for example)?
Many families consider financial literacy as something you start learning at a certain age. Financial literacy is a fundamental tool for living, and it should be part of families’ conversations at an early age.
Financial literacy is something kids learn from and with parents by exposure, over the course of their whole lives. It is one of the basic responsibilities of parenting. Over time, exposure to the system leads to natural absorption of the principles, similar to the way children learn language. If parents want kids to become adults with good financial habits, they should help them develop these habits naturally over the course of their lives.
My Credit My Future (www.mcmf.net) can provide you with tools and literature to help you (and your children) prepare for a more solid financial future.