This is a guest article by personal finance expert, Beth Kobliner. Beth is a member of the President’s Advisory Council on Financial Capability and the author of Get a Financial Life: Personal Finance in Your Twenties and Thirties.
Drinking, smoking, bullying… talking about them with your kids is hard enough. But a new survey shows parents would rather tackle any of those sticky subjects than say the F word: “finances.”
Keep thinking you’ll talk dollars and sense when the kids get older? It may be too late. Research shows that parents are the number one influence on young people’s financial behavior, and that kids barely out of diapers can learn basic concepts about money. Even if you think you’re saying nothing about your finances, your kids are still picking up lessons from the way you shop, save, and behave.
Now there’s a brand new online interactive tool to help parents talk the talk. It’s Money as You Grow, which I helped to develop as a member of the President’s Advisory Council on Financial Capability. Parents can use these 20 age-appropriate lessons and corresponding activities to change kids’ financial behavior for the better. Great for kids age three to 23!
I encourage you to take a few minutes to explore the entire site, which is full of tips for kids of all ages. But for now, here are a few ways to get started:
Preschoolers: You may have to wait before you can buy that toy!
Delayed gratification is the most important lesson you can teach your tykes. The approach for a three- to five-year-old can be super simple. Here’s one idea: As the school year comes to a close, explain to your child that just like she waits for summer vacation, sometimes she has to wait to buy something she wants. Research shows that kids with good self-control are likelier to be financially secure adults, but this lesson is fundamental to overall success in life. A famous 1960s study showed that kids who were able to delay gratification by waiting to eat a marshmallow in front of them had fewer behavioral problems, lower stress, stronger friendships, and even higher SAT scores!
Middle-schoolers: Credit cards can be risky!
To a kid, a credit card can seem like free money. Mom hands over a piece of plastic in the checkout line and, like magic, she gets to take home bags of groceries. But by ages 11 to 13, a kid should know that if you don’t pay off your credit card bill in full every month, you’ll be charged interest and owe more in the long run. Try this: Say the family needs a new computer or is planning a vacation. After you buy the computer or plane tickets, shock your son with the numbers. Head to the Credit Card Repayment Calculator at federalreserve.gov to show him how long it would take — and how much extra you’d owe in interest — if you paid off a $1,000 debt by making only the minimum monthly payments. You’d pay more than $800 in interest over eight years! Explain that if you used cash, paid your bill in full, or made more than the monthly payment (even $20 more a month), you’d be able to avoid such a high fee.
Editor’s note: CardRatings, Consumerism Commentary’s sister website, also offers a credit card payoff calculator.
High-schoolers: You better shop around—for college!
The nation’s collective student loan debt recently passed the $1 trillion mark. Ouch! College is a terrific investment — grads earn almost twice as much as people who didn’t go to college — but that doesn’t mean you shouldn’t shop around. You don’t want your new college grad to have to survive on peanut butter! Money as You Grow points the way to several excellent resources for comparing and cost-cutting, but start the conversation by telling your son or daughter how much you can afford to contribute to tuition and expenses each year. Then, use the CFPB’s Paying for College Cost Comparison Worksheet to compare the costs of a few schools, and determine which one represents the best investment.
If you use Money as You Grow with your kids, I’d love to hear how it goes! Please share your feedback with me in the comments section below or send me a tweet at @BethKobliner.
Updated April 13, 2016 and originally published June 21, 2012.