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How to raise money-smart kids

April is Financial Literacy Month. How much do your kids know about dough?

By Donna_Freedman Apr 2, 2013 1:06PM

Logo: Counting coins (JGI/Getty Images/Getty Images)Halah Touryalai, a columnist at, recently shared a scary little anecdote about a college student who asked what "carried balance" meant.

Instructor Stuart Ritter explained it this way: If you don't pay credit card charges in full, the company sends a bill for the remainder.

The student's response: "What do you mean, 'they send a bill?'"

Seems she didn't understand that you have to use real money to pay for items bought on credit.

"She was never taught how basic money transactions work," Ritter says.

While columnist Touryalai admits this is "an extreme case," she believes it reflects a growing problem in this country: lack of financial education.

April is Financial Literacy Month. How much do your kids know about dough?

Probably not enough, since money is often a taboo subject in this country. But if you don't talk about it, you could be setting up your kids for years of financial struggle.

Don't feel qualified to teach them? You're not alone: Personal finance expert Jean Chatzky says plenty of parents are unsure of their own money skills. Even so, they've probably got real-world lessons to share.

For example: Do you pay bills each month for food, shelter and utilities? Have you saved up to buy big-ticket items, and did you compare prices first? Ever obtained a mortgage, or paid off a credit card or auto loan?

"We don't have to be Warren Buffett or Peter Lynch to teach our kids about money," says Chatzky, the author of "Not Your Parents’ Money Book: Making, Spending, and Saving Your Own Money."

There's an app for that

You could also try a more playful approach, with apps and online games that teach basic money principles. Many are free.

Neale Godfrey, the author of numerous books on financial literacy, developed a pair of games  called "Green$treets: Unleash the Loot!" and "Green$treets: Shmootz Happens." Kids ages 5 to 8 learn money principles like saving, budgeting and dealing with fiscal emergencies -- but they learn them by doing things like building robots, planting gardens and rescuing animals.

"Technology teaches," says Godfrey, a former banking executive. "The kids can have fun and learn -- and not know they're learning."

Children may also click with titles like: 

  • "Save! The Game," from MassMutual, in which players race to collect virtual money while avoiding "iWannas" (roaming temptations that try to take away cash).
  • "For Me, For You, For Later," a multimedia kit about spending, sharing and saving, jointly developed by Sesame Workshop and PNC Bank.
  • "Gen i Revolution," an online game from H&R Block and the Council for Economic Education, is a series of "missions" in which players save characters in financial trouble. Mobile apps will be introduced in mid-April.
Prefer a non-tech approach? Start with an explanation of income and outgo: "The money we earn at our jobs goes into the bank. We take it out to pay for things we need and want, but we cannot take out more than we earn."

If you're uncomfortable with specifics, use percentages: "It takes 80% of what your mom and I bring home just to cover basic expenses and debt service. That's why we’re careful with money."

Talk goals: "If we keep making extra payments, our mortgage will be gone within five years."

Talk big-picture: "We put money in your college fund every payday. That means we have less to spend now, but there's more for you later."

Like the real world

Suppose Junior wants something now, though, and you can't afford it? Tell him why you won't buy, i.e., the money you don't spend on a new snowboard or a bushel of video games is money that's going for food, rent, medical bills or that college fund.

Next, help him brainstorm ways to save up for it. Maybe he can do extra chores, find part-time work, or make the item his One Big Gift at birthday or holiday time. If you can swing it, offer to split the cost -- on the condition that he comes up with his half before you'll chip in.

Ideally, he's saving his allowance. Chatzky recommends having allowances include money for certain basic expenses that you will no longer cover. For a young child, that could be candy or other special treats. Older kids might be required to pay for school lunches and outings with friends.

This teaches decision-making. The cost of dinner, parking, a movie and popcorn might take a teen's weekly fun money plus half his lunch fund. If he decides to do it anyway, he's also deciding to make PBJs. It's just like the real world: Overspend in one category and you need to adjust spending somewhere else.

Goals and values

Adjust -- not borrow. In a consumer-driven society debt can seem like a fact of life, but it's often a choice.

That's where family values come into play: If you've made it a point to live below your means, explain why. Maybe you’re focusing on things that matter to you, such as retirement planning or paying your mortgage off early. Maybe you just want to consume less.

Invite your kids to talk about their own values and goals -- and their dreams. Do they want to go to trade school or college? Become entrepreneurs or join the Peace Corps? Travel the world or make a difference in their own communities?

Dreaming is a little more challenging these days thanks to inflation and unemployment, and to our instant-gratification culture. Teaching your kids a balanced approach to spending will let them indulge a little, but not at the expense of their future needs and goals.

What have you taught your kids about money?

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Apr 3, 2013 4:10AM

20+ years ago my co-workers & friends thought I was NUTS!!!  Why you ask?


When each of my daughters started to drive we made them an authorized user on a credit card we seldom (& did not thereafer) use.  They were allowed to charge certain expenses we agreed to cover (school books, $x for clowthing.....).  ANYTHING else they charged HAD to be paid to us in cash to us when the bill came in.


When they each went off to college each got credit cards in their own right. 


Final result: upon graduation my DDs were nearly the ONLY ones of the people they knew WITHOUT credit card debt.

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