Teach Them Well

Last summer, 16-year-old Calvin O’Neal worked for the New York City Summer Youth Employment program at a public relations firm that paid him by way of a debit card. Many simply spent their earnings, but not Calvin. His parents, Eric and Theresa O’Neal, have been teaching him and his 13-year-old brother, Christian, about money management for years. “Twenty percent of every paycheck went into the bank,” says proud father, Eric. “He was saving for a laptop,” Theresa adds, “so sometimes he would even walk home to save on carfare.”

By summer’s end, Calvin bought his laptop, but the greater asset may be the lessons of saving money and deferred gratification he learned from his parents. The O’Neals are an atypical family. According to a recent T. Rowe Price Parents, Kids & Money Survey, 54% of parents say they could be doing more to teach their children about money. (Of the 505 survey respondents, 46 identified themselves as black or African American.)

Given the low national savings rate, (3.6% in April), most Americans could use a lesson or two on handling their finances. But African Americans have a unique financial profile–one that should compel parents to teach children basic financial literacy as early and often as possible. The reasons are numerous:

–From 1980 to 2007, black households earned less than those of any other racial group: $33,916 (in current dollars). Hispanics earned $38,679; whites, $52,115; Asians, $66,103, according to the U.S. Census Bureau.

–According to the most recent statistics from the Insight Center for Community Economic Development, black median wealth is $31,500 versus white median wealth of $167,500.

–The Center for Responsible Lending has found that black and Latino borrowers are almost a third more likely to get high-cost loans than their white counterparts with similar credit scores.

Early money management lessons could arm future generations against many of these unjust realities while engendering conservative, frugal habits of saving, planning, and spending.

Another reason to talk to your children about money: They are increasingly targeted by advertising campaigns. If you find it difficult to think of your adorable 2-year-old as part of a target demographic, consider the fact that children between ages 2 and 11 view more than 40,000 television commercials a year. According to the Campaign for a Commercial-Free Childhood, companies spend $17 billion annually to market products to youth, up from just $100 million in 1983. Since African American and Latino children, regardless of household income, watch more television than children of other races, it’s important to counter such messages with frank discussions about money matters.

Parents seeking to empower their youngsters with financial skills have several options. One early-learning resource is Show Me the Money (DK Publishing; $16), a book for kids age 7 and up that breaks down the complex subject of economics into digestible, kid-size portions. Written by Alvin Hall, financial correspondent for National Public Radio’s Tell Me More and a financial educator, the book explains the management of credit cards, the concept of free markets, the cost of living, even supply and demand. Are these topics too much for elementary school—age youngsters? Hall doesn’t think so.

“Children are naturally curious about money,” he says. “My book can open a door for parents to talk responsibly about it with their children and to take the discussion beyond their household.”

The O’Neals, who live in Brooklyn, New York, integrate financial lessons into their day-to-day interactions with their sons. “I take them with me to the bank. They both own stocks and both have passbook savings accounts,” says Eric, who owns and manages properties near Pittsburgh. “We’ve talked about how interest works, and they know the difference between needs and wants.” Theresa, who runs her own public relations business, O’Neal & Co., and is also the vice president of media and public relations for Bee Season Consulting, says they also listen to financial audiobooks in the car.

Even young children can learn basic financial concepts. Laura Levine, executive director of the Jump$tart Coalition for Personal Financial Literacy, a group of organizations that promote financial literacy from pre-kindergarten through college, says people must deal with money issues daily yet most individuals have no formal training in managing it.

“There is no financial course equivalent to driver’s ed,” she says, advocating that attitudes and habits about money should be shaped at an early age before independent financial decisions as adult consumers are made. In other words, start talking to your children about money before they express an interest in handling greenbacks. Levine suggests helping an older child figure out how to tip at a restaurant; a younger child who understands pricing can study a menu to determine the cost of items. “The idea of ‘teaching’ can intimidate some parents,” she acknowledges, “but talking to your children and imparting your family’s values about money can happen informally.”

Hall hopes parents will use his book to demystify money. He says: “Money has a kind of magic or mythical power to it but children can cultivate a long-term view instead of instant gratification.”

Other options include setting aside family nights to play money board games or online games such as Break the Bank (at USMint.gov); or making use of financial-themed camps.

At least one study, by the University of Georgia, suggests a correlation between financial behavior and college performance: Students who struggle academically tend to have financial challenges as well. Calvin and Christian, who have had savings accounts since they were 6 months old, shouldn’t have that problem. Since the recession, Christian has become more sensitive to the family budget and on occasion has advised his parents to eat at home rather than dine out. That’s probably good advice for all of us.

By the time your child leaves preschool (or age 5), he or she should understand that …
–Spending, saving, and sharing are ways to use money.
–People have jobs that pay them money.
–Paper money and coins are worth different amounts.
–Planning helps people set goals and make choices about money.
–People give money to help others.

By the end of fourth grade (age 9), your child should be able to …
–Set measurable, short-term financial goals.
–Explain how checks, debit cards, and credit cards work as payment methods.
–Use systematic decision making when making a personal, age-appropriate purchase.
–Explain why using a credit card is a form of borrowing.
–Describe how people can cut expenses to save more of their income.
Your high school graduate (age 18) should grasp enough about finance to …
–Apply systematic decision making to a long-term goal
–Schedule bill payments, write a check, reconcile checking or debit account statements, and monitor statements for accuracy
–Explain how a negative credit report can affect a person’s future
–Identify appropriate investments for accumulating money for a four-year college education, a wedding, a business startup, a house down payment, and retirement

For more information on financial literacy benchmarks, and additional suggestions for money-related home-learning, visit the Credit Union National Association’s “Thrive By Five” website at www.creditunion.coop/pre_k and the Jump$tart Coalition for Personal Finance Literacy at www.jumpstart.org.