Lessons for Students: Learning a Dollar's Value

In homes around Ballwin, Ellisville and across America, families are going back to the basics: They’re working on reducing debt, re-establishing emergency funds and paying attention again to their savings and retirement accounts.

Especially as some of our children head off to college this fall, now is a good time to remember that we shouldn’t overlook our kids in these rebuilding activities.

Time and again, polls have shown the influence of parents on the money habits of kids. A new poll conducted by the Northwestern Mutual Foundation’s financial literacy Web site, Themint.org, confirms this influence (Editor's Note: Fred Harre is employed by Northwestern Mutual). The poll asked teens to choose who had the biggest influence on the way that they saved or spent money.  In a landslide, seven out of ten kids aged 17 and younger said “parents” swayed their actions the most, outpacing “friends” (16%), “TV, magazines, books, radio or celebrities” (14%), and “teachers” (1%).

Experts say one of the best ways parents can help their children, younger or older, to understand money is to talk about it and demonstrate good habits. Still, this is easier said than done.

I know some parents don’t feel comfortable talking about money. As a pointer, Themint.org suggests parents use everyday experiences to start these conversations (without preaching or lecturing, of course). 

For example:

Recognize opportunities to educate
• When watching TV with younger children, play devil’s advocate to the ads that bombard them – help make them more discriminating of what they see.
• When traveling in the car, use the time to comment on the commercial messages emanating from billboards and stores.

Use shopping trips to teach financial lessons
• Talk about why you choose one product over another – describe details about value, quality, ingredients, etc.

Make bill-paying a learning experience
• Link utility bills to actions – like running water, lights, TVs and computers.
• Demonstrate the impact and effect of large, unexpected expenses on the overall household budget.

Talk about the cost of living
• Payday is a good day to show kids the effect of deductions – for taxes, insurance, retirement, etc. – and that no one gets to bring home all the money they make.
• Talk about the role of taxes in supporting the community – its schools, roads and services.

Like measuring growth in inches, start setting goals for your child and track their financial progress.

For example, the preschool years are a good time to introduce the piggy bank and simple money concepts. Ages 7 to 13 might be a good time to introduce an allowance and the principles of earning and saving, if this is feasible.

High school is when to increase financial responsibilities, explain protection against risk and talk about safe debt levels. As our kids go off to college, it’s important to address the advantages and disadvantages of credit cards, explain good and bad debt and encourage the idea of “pay yourself first.”