Lessons to Build Financial Literacy in Kids

by Jan Combs, former financial aid officer at Harvard Graduate School of Education Whether they are preschoolers, middle schoolers, or in high school or college, now is a great time to speak with your children about money and impart valuable financial lessons. No matter their age, your children can grasp age-appropriate money milestones that will serve them well moving forward. Check out the below exercises, organized by age group, for fun ideas for conversation starters and activities to engage your children in learning important money concepts. Younger Children  Children ages 3 to 5 can begin to build a foundation of money understanding that will serve them moving forward. Foundational concepts include recognizing money, planning ahead, and controlling impulses. Play Store: Pretend that you are in a store and gather some items; this will allow for conversations around using money to purchase things that people need. Discuss how people need to first earn money by working and then save money in order to make purchases. Play Cashier: Once you gather items, pretend with your kids that you are purchasing items and they are the cashier. Your kids must give you back the correct change! Ask your child to count back the change starting from the original price of the item—this exercise allows them to get familiar with money and learn the value of dollars and coins. Read Books: This age group tends to have favorite book characters, like Arthur, Berenstain Bears, and Amelia Bedelia. Even young kids can learn valuable money lessons (such as saving, spending, and donating) from their favorite characters featured in books. Play Games: Kids love games. Play some that require your children to follow directions and practice controlling their behaviors, such as Simon Says and Red Light Green Light. Card games, such as Crazy Eights and Go Fish, help kids recognize and navigate the world of numbers! School-Aged Children and Pre-Teens Children ages 6 to 12 can understand the good habits that shape how one can earn money, save money, and become a savvy shopper. Play Board Games: Board games provide a solid opportunity to expose kids to concepts around money management. Some good ones include:

• Exact Change – players learn to count money (grades 1+).

• Pay Day – players learn how to use a paycheck, including savings and loans (grades 3-6).

• Monopoly (grades 4+) and Monopoly Junior (grades 1-3) – the classic game of buying, selling, dreaming, and scheming.

• The Game of Life (grades 4+) and The Game of Life Junior (grades 1-3) – players choose a career, a lifestyle, and deal with the twists and turns of life, including having children and buying insurance.

• The Stock Exchange Game – players learn about stocks and principals of investing (grades 4+).

Board games expose children to financial concepts, promote social skills, such as communication and cooperation, and best of all, they bring families together to have fun! Watch TV Commercials: Discuss advertising and it is a commercial’s job to entice consumers to buy a specific product or service. Explain that commercials use special effects, such as music, comedy, and celebrities, to promote products; it is important to look beyond the ads prior to buying. Review a Paycheck: Share a real one or a sample one, and introduce the concept of taxes and deductions… and how you don’t get to take home your entire salary. Dig Deeper Into Taxes: While walking around your neighborhood or in your community, pointing out roads, schools, buildings, and bridges. Talk about how each item is funded and how families need to pay taxes, to support their community. Compare Prices: Help your children use the internet to compare prices. The next time you have a big purchase to make, get them involved in doing the research. Introduce them to the concept of comparison shopping and involve them in comparing and contrasting items from a number of stores. Teenagers and College Students As teenagers and college students begin to earn money, they should begin making their own financial decisions, with continued guidance to support them in strengthening their habits and navigating the world of finance. Discussing money choices with a parent helps older children gain confidence in their own decision-making capabilities. Build Research Skills: Find online calculators that: (1) demonstrate what it will take to pay for college, (2) compare the costs of a new car versus a used car, or (3) show the true cost of credit based on paying just the minimum credit card balance each month. There are many online resources available—FICO’s Financial Calculators can provide a great starting point. Discuss Insurance and Risk: Insurance protects consumers from risks, whether to one’s health or property. Introduce your children to the importance of having insurance and protecting themselves against risk. Discuss the different types of insurance and the reasons why someone would need insurance. Explain that after a loss, such as a car accident, happens, the premiums paid to an insurance company protects you from having to pay the full cost of fixing the car (or cars) involved. Comparison Shopping: Engage your child in the act of comparison shopping. Have your child research cell phones and plans; create a spreadsheet with pertinent data and evaluate all the options. Or consider having your child assist in planning the next family vacation and compare costs for flights, hotels, car rentals and activities. Discuss Career Opportunities: The Bureau of Labor Statistics (BLS) publishes the Occupational Outlook Handbook (OHH). This handbook houses information on thousands of careers including their educational requirements, job parameters, median salary ranges, and projected job growth. In addition to sharing important career-specific data, this is a helpful resource for students to explore how their talents, skills, and interests may translate into a particular career. Credit Reports: Pull your credit report for free using www.annualcreditreport.com and share it with your child. Talk about your plans to pay down debt, and let your child help you calculate how long it will take (and the benefit of paying more each month). This activity provides a great opportunity to discuss how best to build solid credit and manage debt. Identity Theft Heads Up: Older children are in the demographic that may be impacted by fraud and identity theft. Speak with your kids about phishing, what the purpose is, and how they can spot a scam email. Share with them details on how to report an incidence and discuss where to turn if they have been a victim of identity theft. Encourage Saving and Investing: Calculate how much money you need to contribute each month in order to arrive at a specific savings goal. This calculator may be useful. Having age-appropriate conversations with your kids, and engaging them in fun activities, will instill important financial literacy lessons that they can draw upon for a lifetime.