TEACHING KIDS ABOUT MONEY
Bridging the Gap Between Financial Literacy and Financial Technology at an Early Age
By Mac Gardner, CFP®
There are three common questions when it comes to early childhood financial education. What is the best age to start teaching kids about money? What are the best tools to teach kids about money? Who should be responsible for teaching kids about money?
These questions led me to create FinLit Tech as a resource for families to find new and creative ways to learn about personal finances. The field of financial literacy has evolved over the years. Financial technology is changing the way we all engage and interact with our personal finances. The mission at FinLit Tech is simple: to build a bridge between financial literacy and financial technology. We believe fintech can help scale and democratize financial literacy.
When to Teach Children About Money
When it comes to teaching children about money, the three questions mentioned earlier have an impact on a child’s development. Let’s start with when. The best age to start teaching children about money is age seven. A recent Cambridge University study* tells us that a child starts to understand their relationship with money as early as age five; however, age seven is the point where a child ideally begins to fully understand how money works and how they can manage it. My global bestselling children’s book, “The Four Money Bears,” was written to help families with young children start the conversation about money. The earlier we can help children understand they have four options with money—spend, save, invest, and give—the earlier they can understand the power of money to help them reach their personal financial goals.
When it comes to teaching about money and financial literacy, I often use the “3 Rs.” First, we realize what money is. Then we recognize what it does. Finally, we rationalize how to use it. The importance of teaching children about the four functions of money is critical. This is because most children are taught they can spend money or save money. Few are taught about investing or the power of altruism or giving money to help others in their community. If a child realizes what money is but only recognizes they have two options (spending or saving), they will be limited by their ability to rationalize the use of money. However, if they are taught they have four options, they can then make better decisions as they get older. Early knowledge and exposure to fun financial literacy approaches can help children on their path to long-term financial success.
What Financial Literacy Tools Are Best for Children
The next question that often arises with early financial literacy deals with the best tools to teach kids about money. There are books, board games, worksheets, and so much more. The educational content is vast. However, education is evolving. One of the main factors we’ve seen in the success of early financial education is meeting the child where they are. By this we mean using tools that can engage a young person. Children are learning digitally and using new tools and formats to engage their world. We’ve seen gamification as a powerful tool to help young kids learn about money. In fact, we’ve developed a digital game based on "The Four Money Bears" called Berryville. The game teaches personal finance and entrepreneurship. It uses technology to implement the “T.A.T. Method” to teach, analyze, and track the financial education process starting at the K-5 education level. We call it FUNancial literacy.
One of the key factors in early childhood financial education is the ability to help young people develop healthy financial habits. This leads to healthy financial behaviors, which lead to healthy financial traits as adults. By gamifying the financial education process early, we can help children develop not just educational knowledge but also practical application and habits of how to use money. We compare "The Four Money Bears": Berryville game to a digital lemonade stand. Players can run a business, learn about personal finance, and apply this knowledge to their money in a virtual setting. This allows them to make mistakes and find success in a safe and child-friendly space.
Who Should Teach Children About Money?
The last question listed in the opening of this article is one that truly has many answers. Who should be responsible for teaching kids about money? Many believe kids should learn about money at home. This isn’t a bad answer. The problem lies in the fact that many parents never received formal financial education in their lives. So how can they teach their children?
We believe financial education should fall in line with early primary school (K-5) curriculum. Just as children are expected to learn and understand reading, writing, and math, they should also be taught how to manage money. The experience for many starts with that first lemonade stand or crafts that are sold to friends and family. Many children learn through digital tools today; schools, families, and community organizations can now provide financial literacy resources at an early age. The question doesn’t have to be WHO should teach kids about money, but HOW should we teach kids about money. We believe financial education should start early, and it must be done in a fun, engaging, and meaningful way.
How Financial Advisors Can Participate in the Education Process
Financial advisors who give back to their communities through financial education have been successful in a few ways. The biggest factor is giving their time. Advisors can give back through various non-profits focused on early childhood education. Some advisors give tools like books to parents with young children as a resource to start the conversation about money. A wise person once told me, “If you take care of a client, they are thankful. If you take care of their child, they are forever grateful.”
Giving back to your community not only helps your soul; it can also help your business. Many advisors have taken their practices to a new level by showing their clients and their community that educating future generations is the larger goal. When clients see their advisor wanting to ensure future generational success, they feel confident in their long-term approach to their clients and business.
Learning about money doesn’t have to be a chore. It can be just as easy as learning to speak a new language, learning about math, or learning to read. Two big factors in the financial education journey are starting the process early in a child’s life and finding tools and resources that meet them where they are. Technology will continue to play a big impact in how we use money and how we learn about money. The sooner we bring the two elements of financial literacy and financial technology into the financial life journey of our young people, the better off they will be as adults. The journey continues…
Mac Gardner, CFP®, is founder and Chief Education Officer of FinLit Tech. Reach out to him at mac.gardner@finlittech.com or 305-600-0072. Learn more about his company at www.finlittech.com and visit www.thefourmoneybears.com for more information about the game referenced above.
image credit: Adobe Stock Images