Submitted by Michelle Gobert, Positive Youth Development Educator

Financial education, or personal finance classes, give youth the knowledge and skills they need to make informed financial decisions, develop sound financial habits, and manage money effectively.  When utilized properly, these life skills can help young adults finance their education, purchase a home or vehicle, and provide financial stability regardless of life’s ups and downs.

The state of Wisconsin started required its schools to incorporate personal financial literacy curriculum in 2017 with the passage of WI Act 94.  According to the Department of Public Instruction, most local schools in Wisconsin, have a stand-alone course, or an equivalent elective course that fulfills a graduation requirement. 

Parents and Caregivers Financial Influence

Personal finance classes, friends and the media all influence a child’s understanding of money.  However, experts tell us that the strongest influence on a youth’s financial understanding is their parents and/or caregivers.  If teaching your child about money is on the top of your to-do list for the new year, Extension offers the following ideas to get you started:

Use Money Soundbites.  Children can learn valuable personal finance concepts through the repetition of phrases that describe the importance of saving money. An example is Ben Franklin’s soundbite from more than 200 years ago: “A penny saved is a penny earned.”  Other soundbites include:  “pay yourself first”, “you can’t borrow your way out of debt,” and “don’t spend money you don’t have”.

Teach Budgeting Skills.  Many parents teach their children how to budget with an allowance that effectively acts as a child’s “paycheck.” Parents should also provide guidelines to help children manage an allowance, including what it covers (e.g., discretionary clothing purchases) and does not (e.g., school lunches) and expectations for long-term savings (e.g., “from every dollar, save a dime”) and charitable gifting. Another key guideline is chores expected of kids as a “citizen-of-the-household” vs. those that earn extra cash.

Let Children Fail. Children commonly run out of money before their next allowance. One option is to let them “do without” for a period of time. Another is to loan them needed money with an agreed-upon repayment schedule and, perhaps, interest. Children learn valuable life lessons from money mistakes as well as successes. Parents can debrief these mistakes and help children improve future money management.

Leverage “Real Life” Experiences. Parents can use everyday activities, such as trips to the supermarket or a bank ATM deposit, to teach children about money. This may require real-time explanations about what is happening. Take the time. For example, tell children that a debit card purchase will be immediately subtracted from their checking account and that credit card companies will send a bill. Remember that children observe everything including shopping methods, tipping at restaurants, acts of charity, and bill-paying methods.

Foster Savings. Parents can help children open a savings account at a local bank or credit union and teach them about interest and compound interest. Another strategy that some parents use to motivate their children to save is to match a child’s savings like an employer may match health savings accounts.  Another useful savings tool is a family savings jar to which everyone contributes loose change to save for a shared financial goal.

Financial literacy resources

The Consumer Financial Protection Bureau offers tips and activities to help grow a child’s money skills and habits.  Their Money and Your Grow Bookshelf offers the following titles for ages 4-8:

• Alexander, Who Used to Be Rich Last Sunday by Judith Viorst.  Find out what Alexander learns about self-control after he overspends.
• A Bargain for Frances by Russell Hoban.  See how Frances had to work on prioritizing when she bought a tea set.
• The Berenstain Bears & Mama’s new Job by Stan and Jan Berenstain.  See how Mama’s hobby became a way of earning money for the family.
• The Berenstain Bears’ Trouble with Money by Stan and Jan Berenstain.  Check out ways the Bear family helped the cubs with saving their money.
• But I’ve Used All My Pocket Change by Lauren Child.  See what happens after Lola makes some spending choices that she regrets.

For more information on Youth Financial Literacy, or to learn more about UW-Extension Forest County’s Early Childhood Literacy programming, please contact Michelle Gobert at 715-478-7797, or visit our website at https://forest.extension.wisc.edu