Once they reach middle school, most kids yearn to be treated like adults. Some financial services now available to kids -- including checking accounts, debit cards, credit cards, and even co-signed loans -- do just that. But can kids really handle all that financial responsibility? The answer for most kids is not all at once, and not without proper education and supervision.
Sarah Williamson, CPA, who teaches finance camps for teens and a "Teach Your Teen the 'Real-Life' Money Game" for parents through Bellevue Community College, says it makes sense to start financial education early. "Money skills, like anything else, take practice to develop and hone, and starting financial education early gives your child the opportunity to observe and model your behaviors and learn the values that matter to you," she says. The 11-14 age group tends to be less resistant to parental instruction than older teens, and they will also have more time to see their money grow, she adds.
While 11-year-olds are obviously much different from 17-year-olds, Williamson says the teaching strategies are the same. Money comes in (whether from a small allowance or from a serious part-time job) and goes out (be it for a candy bar or a car). Either way, they both need a spending plan in order to meet their goals. "The key," she says, "is to start helping them think for themselves. The difference is the amount of resources and responsibility you give them."
Williamson recommends a progression as children demonstrate competence with each new level of complexity. "Start with cash," she says, "then layer on a savings account and ATM card, followed by a checking account with debit card, and finally build up to an investment account."
How quickly a child masters each of the stages will vary depending on the individual. "I have found it depends so much on the child," says Jill Mogen, a mother of three from Ballard. "My 11-year-old is money savvy and a saver by nature. My 13-year-old is more of a spender, but is learning more as I get better at parenting."
Many parents are initially reluctant to embrace ATM, debit and credit cards but, Williamson notes, "We are moving to a paperless society. Rather than avoid teaching teens about these methods, it is imperative to teach them proper use while they're still at home and consequences are relatively minor."
Since parents must co-sign for most children's accounts, they maintain a degree of control and the ability to monitor transactions. Parents can determine things like maximum balances and credit limits in order to protect children from making big mistakes while they are learning new skills.
Most financial institutions now provide account statements with up-to-the-minute online access. This allows parents and kids to keep better track of spending habits and see exactly where the money goes. Many parents have come to appreciate this advantage, particularly with debit cards. Also, because debit cards are protected by a PIN number, the money in the account can't be lost or stolen as easily as cash.
One institution offering serious financial services to children ages 11-17 is the School Employees' Credit Union of Washington. Notes Gary Walcott, the credit union's vice president of marketing, training and sales, "The reason we set up the youth accounts is we want to span all the age groups because we're convinced, and our members have noted, that parents want to receive educational support in teaching money management skills to their children, and the earlier the better."
Parents can use the tools and information offered by financial institutions, books and Web sites. (See sidebar, this page.) They can also provide real-world examples to help educate their children about personal economics at home.
"I think kids need to be taught how the money in their lives is generated, not just from their parents, but what their parents do and who for -- to pay for things is an underpinning of any citizen's life," Mogen says. "They see community service, they see donations, they see work for pay, they see generosity or thriftiness... Real-life information can be the best teaching aid."
In addition, there is a growing support for formal personal finance education in school. Dana Twight, CFP, member of the Washington State Board of Education, says, "Our mission is to provide leadership, support and advocacy, through policy, so that each student achieves success in school and life. We certainly believe that financial education and literacy is part of that success."
Indeed, many schools are already providing some forms of personal economics instruction as part of their math and social studies curriculums. And in 2004, the Washington State Legislature created a public-private partnership to identify financial literacy skills and knowledge, provide information on instructional materials and encourage school districts to provide students with financial literacy instruction.
However you decide to approach personal finance education for your child, there are definite advantages to starting early. Says Twight, "If our children have a chance to learn about money management sooner... then they have a chance to learn positive things about saving, investing and charitable giving at an earlier age. Like the benefits of compound interest, financial education is best begun when time is on your side!"
Laurie Thompson is a freelance writer on Seattle's Eastside and mother of two.
Resources for parents
- www.jumpstart.org and www.wajumpstart.org Jump$tart Coalition for Personal Financial Literacy and Jump$tart Washington, an affiliate of the national coalition
- http://seattle.ja.org, Junior Achievement of Washington -- trained volunteers presenting personal economics and work issues in schools by teacher request
- www.reallifemoneygame.com and How to Play the "Real-Life" Money Game With Your Teen (available Summer 2005), by Sarah Williamson
- Raising Financially Fit Kids, by Joline Godfrey
- Money Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Children, by Neale S. Godfrey, and Carolina Edwards
- The Sink or Swim Money Program: The 6-Step Plan for Teaching Your Teens Financial Responsibility, by John E. Whitcomb
- Capitate Your Kids: Teaching Your Teens Financial Independence, by John E. Whitcomb
- CashCow Kids: The Guide to Financial Freedom At Any Age, by Lisa Jordan and Sheri Provost
- The First National Bank of Dad: The Best Way to Teach Kids About Money, by David Owen
Resources for Kids
- www.cusucceed.net/index.php?cuid=67358591, CU Succeed-Teens Financial Network, provided by the School Employees Credit Union of Washington
- www.orangekids.com, Planet Orange, designed for grades 4-8
- http://googolplex.cuna.org/32032/ajsmall/index.html, Googolplex, an online magazine for middle-school students with stories, games and puzzles, available through the Boeing Employees' Credit Union
- The Everything Kids' Money Book: From Saving to Spending to Investing -- Learn All About Money!, by Diane Mayr
- Complete Idiot's Guide to Money for Teens, by Susan Shelly
- The Totally Awesome Money Book for Kids, Second Edition, by Adriane G. Berg and Arthur Berg Bochner
- Neale S. Godfrey's Ultimate Kids Money Book, by Neale S. Godfrey and Randy Verougstraete
- The Kid's Guide to Money: Earning It, Saving It, Spending It, Growing It, Sharing It, by Steve Otfinoski