The White House has put the final touches on a nifty new website offering guidelines on how parents can reinforce money lessons with their kids, starting as young as age three. It’s called Money As You Grow: 20 things kids need to know to live financially smart lives, and it’s an outgrowth of the money milestones project that I first reported in January.
The website is interactive and easy to use. It divides broad, easy concepts into five age-appropriate groups: 3-5, 6-10, 11-13, 14-18, and 18-plus. Click on the age group and up pops four core lessons. Click on a lesson and up pops three to six activities that will reinforce the lesson.
For example, in the group aged 3-5 concept No. 1 is “you need money to buy things.” Suggested activities are teaching your child to identify coins, discussing how to value something that is free (like playing with a friend), and identifying items that cost money (like ice cream and clothes). These suggested activities are the newest part of the project, and while at first glance they may seem to lack depth they nevertheless give the website a welcome level of utility. Many parents don’t know where to start and this offers a guide.
The lessons and activities get more involved as you rise through the age groups. At 6-10, you are teaching kids to comparison shop and earn interest with a savings account. Suggested activities include researching products online and letting your child keep the savings if they find the same thing for less; and opening a savings account and discussing the interest rate and federal deposit insurance.
At 11-13, you are teaching about identity theft and the value of saving early in life. Suggested activities include talking about “free” online games and ringtones designed solely to get your credit card and Social Security numbers; and showing on a calculator the substantial difference between saving $100 a year for 30 years and saving for 50 years (final balance is more than three times higher).
At 14-18, you are teaching about the costs and the value of college and the impact of income tax on your paycheck. Suggested activities include discussing financial aid, the higher cost of private schools and relative value of different degrees; and talking about tax brackets and what your tax dollars accomplish. By 19, you are talking about health insurance and investing. Activities may include discussing how long a child can remain on a parent’s insurance policy (age 26); and comparing mutual fund expense ratios and looking at the tax advantages of a 401(k) plan or Roth IRA. And there is much more.
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As you can see, many of the “activities” are really talking points, especially at the later ages. But you might find a way to make the discussion engaging by looking for real-life examples. Do you know anybody who borrowed too much and lost the house? That offers a good lesson in the perils of debt and possibly being too trusting of bankers and sales people. Know anyone who lost their nest egg when bank stocks collapsed in 2008? That offers a good lesson in perils of not being diversified in your investments.
The Money As You Grow website boils down thousands of pages of research from a dozen different sources into something people can actually use. It comes from the President’s Advisory Council on Financial Capability, one of a handful of federal authorities charged with raising the financial literacy of Americans as part of a broad effort to avoid another financial meltdown.
The guidelines are simple by design. They won’t transform the population into money wizards overnight. The idea is to raise enough awareness of financial issues that individuals will know enough to at least ask more questions when confronted with a financial decision. Which is a good place to start.