Understand the Learning Process
Children learn to manage money in three key ways, says Paul Golden, a spokesman for the National Endowment for Financial Education, which has conducted research into financial behavior. “Parents are the No. 1 influencers,” Golden says. Secondly, children absorb information from whatever formal financial training they receive outside the home. The third way kids learn is by managing their own income, which they receive from either a job or by way of an allowance.
The most effective financial education programs take all these factors into consideration. Golden points out that NEFE has a learning module for parents that teaches them how to communicate with their kids about money. At the very least, parents should personalize what they learn by tying lessons to the family’s own financial situation, Golden advises. Adding an interactive component to financial learning can bring the information to life.
Experts suggest allowing your child to make financial decisions with small amounts of cash. Using real money or cash from Monopoly, you can create fun exercises, such as playing store; or group projects, like setting up a lemonade stand. “Half the battle is getting our kids interested and engaged in what they’re learning,” says Laura Levine, executive director of JumpStart Coalition for Personal Financial Literacy, a national coalition of organizations that provide advocacy, research, and education resources to improve the financial capability of young people from preschoolers to college-age adults.
Group dynamics is another factor that can play a role in helping your child retain financial knowledge. It’s like peer pressure in a good way, says Nan J. Morrison, president and CEO of the Council for Economic Education, an organization that trains teachers in financial literacy instruction. “If you have a whole class of kids getting excited about saving money, it’s hard to be the grumpy little kid sitting there and saying ‘I don’t want to participate,’” she says.