AND SHOULD CONTINUE
By the age of three, kids should know how to take turns, walk up stairs and get dressed without help. They should also be prepping for retirement.
With pension systems in a lasting state of erosion, there’s no such thing as starting too early. An extra 10 years of portfolio growth can mean the difference between an nest egg of $1 million and one of $2 million at age 70.
Not that anyone expects a child to think in such terms. Yet age 3 is when executive function skills – like the ability to control impulses and parse information – enter rapid development. By fostering these skills at an early age, parents just may put their kids on a glide path to financial security. Teaching a 3-year about portfolio management doesn’t make sense, but it is not too young to talk about smart choices and laying the groundwork for wiser saving and spending decisions far into the future.
School based financial education should include benchmarks for kindergarteners. Kids at this age should know that a fair trade benefits both parties, different tasks have different rewards, and a need is different from a want.
It may be asking a lot of toddlers, but the stakes are high. The average 15-year old in the US ranks in the middle of the pack from 18 developed nations in financial ability; adults in the US ranked 14th among 141 nations (the vast majority of these countries are underdeveloped; developed nations like Denmark, Canada and Germany leave the US in the dust). There has been little progress in the number of high schools requiring a course in economics or personal finance. Young adults required to take a personal finance course in high school had higher credit scores and fewer missed payments. Education systems that stress math do best.
Setting the young on a better financial path shortens recessions and mitigates income disparity. More than 1 in 3 workers spend 3 or more hours per week stressed about their finances with a lot of lost productivity. Youth from low and moderate income families struggle the most with student debt and shy away from courses that lead to better-paying jobs. Personal finance is an important lever to help.
There are four simple lessons to start with when children are aged 4-5: you need money to buy things, you earn money by working, you may have to wait to buy something you want, and there is a difference between things you want and things you need.
Conversations about how playing with a friend are free but video games cost money, how people like bus drivers and painters are at work, why you make choices while shopping and why it is worth it to wait, if they must, for a turn on the swing – all vital baby steps.
And that financial education should continue – possibly forever. If you don’t know how to teach your kids how to handle their money, pay someone who does. It will be the best money you have ever spent on them. And foremost, run your financial affairs in a responsible way. Parenting is all about being a good example. It really is not necessary to tell your kids a whole lot if you behave as a mature responsible person. Tell them to read all about here.