For many parents, sitting down to discuss birds and bees with their children is much easier than talking about personal finance dollars and cents. But during this time of financial instability – with record high unemployment and extremely volatile markets – teaching children the importance of making good economic choices is more essential than ever.
“This can be such a difficult topic for parents to bring up, especially if they are struggling to make ends meet,” said Kathleen Brennan, who teaches financial literacy and economics to her students at Mount Saint Mary’s. Watchung Academy for 20 years. . “You don’t want to worry your children, but you still want to make them realize that they must learn to live within their means.”
The pandemic is “the ultimate teaching moment” for sharing with children the importance of having an emergency savings account – and savings in general, “said Joseph DiFiglia, executive director of the New Jersey Council for Economic Education (NJCEE) at New Jersey City University (NJCU). “There’s no real secret to this – it’s spending less than what you earn and paying your bills on time.”
In fact, long before the pandemic hit, New Jersey had implemented mandates requiring high school and college students to receive financial literacy classes. The NJCEE provides professional development to K-12 teachers to give them the tools they need to help students meet state requirements with a curriculum developed by the National Council for Economic Education.
But the pandemic has created a situation where the worst-case scenarios that teachers often warn students about – like losing a job or not having enough money to retire – unfold in real time like many adults who don’t. not see the importance of budgeting, saving and investing have a huge financial impact, unable to pay the bills or put food on the table.
“The earlier you start to develop good habits and save money, the better off you are,” Di said.Figlia, who is also an assistant professor at NJCU after retiring in 2012 from the Red Bank-based investment firm he founded. “I firmly believe in forming good habits and taking personal responsibility, which will reward people on the road,” he said.
Kevin Morgan, who teaches financial literacy classes at Marlboro High School and is a facilitator at NJCEE, says he’s amazed at all the people who rely on their stimulus checks and tax refunds to help them get by. go out. “This speaks to the importance of paying yourself first,” he said, “which means making sure you save, invest and create an emergency fund – which takes time.”
When students enter her classroom at the start of the school year, Morgan said he begins by welcoming them in “the most important class that they will follow in high school”. He is aid this is not to discredit all the other important courses they will take, but because, unlike chemistry and algebra, “financial literacy and economics are everyday in your life.”
Although Brennan and Morgan work with high school students, they stress that it’s never too early to start talking to kids about money. following are some tips that can help parents start talking to their the children on money, no matter how young they are.
Financial Literacy 101 for Kids of All Ages
Ah, make decisions
Children as young as kindergarten children can be introduced to the concept of good decision making, said DiFiglia, which likens the concept to learning to eat healthy. “Sure, we know celery sticks are better for us, but we still want donuts,” he said. Children need to learn the value of delayed gratification, which has been linked to a number of positive outcomes later in life, including higher SAT scores, greater academic confidence, a healthier weight, and improved skills. adaptation to cope with stress and anxiety, according to the American. Psychological association.
“If we can expose young people to the consequences of these decisions at a younger age and provide them with the tools,” said DiFiglia, “They’ll be in better shape on the road.”
It’s difficult in today’s consumer culture, observed Brennan, where advertising turns everything from a desire to a need. “It’s important for students to understand that life is about choice and trade-off, and you always measure the benefits and costs in whatever you do,” she says..
Money in the bank
One of the best ways to start talking about money with kids is to help them set up a piggy bank so they can learn the value of saving. “The earlier you start, the better off you are,” said Brennan, who encouraged parents to help their child save money for the video game, the karaoke machine, or whatever they asked for.
By encouraging them to save money for her purchase, Brennan said parents empower their children and teach them the importance of saving for a rainy day. “All of these concepts are important to pass on to our children from the start, especially in a pandemic where we still don’t know how we’re going to get out of it,” she said.
Brennan, who is also a facilitator for NJCEE, is an advocate for providing regular allowances to children, especially when tied to tasks that help them recognize the satisfaction of being paid for work. “It’s empowering for a child to earn his (or her) own money and it helps (or she) develop a sense of independence without having to rely on someone else,” says -she.
A Di exerciseFiglia does with college kids is to get them to think about household expenses, especially the cost of owning a pet. “Everyone wants a puppy, but then you start adding up what it costs,” he says.
Debit vs credit
As we move towards a cashless society – especially while trying to minimize contact during a pandemic – children have fewer opportunities to tie purchases to the true value of items. “They just see us swiping our cards when we go to the store,” Brennan said. “When you don’t physically rely on cash, I think kids can lose track of what they’re spending.”
Another important lesson is to teach kids the differences between credit and debit cards, and that the first is really just a loan that should be paid off in full at the end of the month, Brennan said.
The reality of university debt
It’s almost like all of the advice above is actually just training for one of the biggest decisions high school students will ever make – whether it’s worth going into debt to pay. their university studies. According to the US Department of Education, the average student loan debt is around $ 32,731 with an average monthly payment of $ 393.
One of the first things Morgan does with his students each year is take an inventory of interests and career prospects to get them to think about jobs that interest them. “We say, ‘Follow your passion. To follow your heart,‘ but in an economy like this you could be made unemployed, ”he said. “We are looking at the types of professions that will be able to weather financial storms.”
Brennan asks her students to look at data from the Bureau of Labor Statistics to see the likely entry and mid-level salaries for future occupations chosen and to determine whether it is worth taking on $ 75,000 in debt while they would only earn $ 30,000 a year. “It opens their eyes to see that a college degree doesn’t mean you make $ 100,000 a year,” she said.
“Not everyone wants to be a coder, but it’s important to come in with your eyes wide open,” she says. “There is more to life than accumulating a large salary, you have to be happy.”
If your child is 6 or 16, it’s never too early – not too late – to start talking to them about money and making the right choices so that in times of crisis, they have a strong financial system in place.
“It’s all about making good decisions”, DiFiglia said. “A dollar spent today is a dollar you don’t have tomorrow.”