The events of the past few years — from the housing market collapse and resulting Great Recession, to the painstaking economic recovery — have made it clear that we know far too little about how to responsibly manage our money.
Yes, much of the blame for our recent financial hardship can be attributed to the reckless, predatory actions of financial institutions, but if we as consumers do not recognize our own culpability we’ll be doomed to repeat our mistakes and bequeath our bad habits to future generations. For example, a CardHub analysis found we’ve actually racked up more than $120 billion in credit card debt since the beginning of 2010 and the National Foundation for Credit Counseling reports only two in five U.S. adults have a budget. We obviously have not learned our lesson.
What, then, does it say about our kids’ future when the majority U.S. parents feel their children do not know the basics of sound money management? It’s worrisome to say the least, and that is why we must begin teaching young people the tenets of financial literacy as early as possible.
Constructing a Framework for Financial Literacy Education
CardHub interviewed more than 50 experts in the fields of education, public policy, early childhood development, economics and personal finance about this very issue, and roughly 70 percent of them believe that financial themes should be incorporated into elementary and secondary school curricula. The question is how.
The answer is to leverage age-based teaching methods to introduce young children to concepts like saving and the value of a dollar while progressing to more complex topics as they get older. It’s also important to point out that the lessons should take place both in the classroom and at home, using both conceptual and experiential teaching methods.
Start Young and Make It Fun
The objective of a financial literacy program as it relates to elementary-aged children is to ingrain fundamental financial values without the process seeming dry or arduous.
The ubiquity of smartphones, tablets and computers as well as the growing role of technology in schools — President Barack Obama has plans to connect 99 percent of U.S. students to high-speed Internet in schools within five years — stand to make that task much easier. For example, a number of money-oriented apps for young children have spawned from the struggles of the Great Recession. They include:
— Savings Spree: Designed for children ages 7 and up, this award-winning app requires users to make decisions about saving, spending, donating and investing their money using real-life situations and corresponding consequences.
— Financial Football: The product of a partnership between Visa and the National Football League, Financial Football requires students to correctly answer personal finance questions in order to lead their team down the field and score.
— Fraud Scene Investigator: This noncommercial, online investor education curriculum, which is something of a mix between “CSI” and Carmen Sandiego, tasks players with getting to the bottom of a $1 million investment scheme and putting the perpetrator behind bars, leveraging online news content and individual research.
— Lemonade Stand: This app enables students to flex their entrepreneurial muscles by making decisions about inventory investments, sale prices and profit margins, as they relate to an imaginary lemonade stand.
The fun and games don’t have to stop once middle school or high school begins, either. The subject matter should simply be presented in a more overt fashion and with increasing sophistication. In fact, teachers can actually leverage students’ interest in money to boost their engagement with more traditional subjects.
“Topics like interest rates, savings, bonds, rate of return can be taught in projects that span classes like social studies, science and math — for example, a project to build a community garden or to improve air quality with a mix of public and private financing,” Alicia Dowd, co-director of the Center for Urban Education at the University of Southern California, told CardHub. “Educational researchers emphasize the importance of active learning and projects that take on real-world problems — this applies to learning financial concepts as well.”
Test Skills Under Fire
Dowd’s comments underscore the importance of practical experience to financial education. You simply cannot learn what it’s like to manage your own money in a classroom or with a game. That is why parents should start giving their kids a bimonthly allowance on a prepaid card that they have linked to an online budgeting tool like Mint.com, while requiring them to pay for some of their own expenses when they reach high school.
The combination of a prepaid card and the tools of modern-day budgeting is perfectly suited to this task because the prepaid card won’t impact a young person’s credit standing, and the budgeting practice will familiarize them with the process of tracking and managing money in the world of online banking. As long as parents don’t supplement their kids’ allowance or budge on their payment requirements, these young people will be forced to learn how to budget and prioritize expenses.
Parents can further promote such habits by conducting performance reviews, providing advice and ultimately giving young people more freedom by progressing to a monthly allowance deposited into a checking account and then a student credit card with the support of a quarterly stipend.
Final Thoughts
At the end of the day, financial literacy is a perfect example of the old saying that “it takes a village to raise a child.”
If we truly want to prepare future generations for financial success, parents, teachers, government regulators and other bright minds must band together to rethink the structure of education in this country and the role of money management in it.
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How to Save Future Generations From Financial Illiteracy originally appeared on usnews.com
