By Sam X Renick
Great money habits learned early can set up a child for a lifetime of financial freedom, opportunity and security. Conversely, the wrong money habits are likely to lead to increased instability, insecurity, stress, lack of freedom and lifelong debt. That is obvious. What is not so obvious is research from Cambridge University indicating adult money habits and attitudes are set by age seven.
Start talking to kids prior to the age of seven about money and what you will quickly discover is they have thoughts, feelings and attitudes about money. Predictably, most of it links money with spending. And, it is not “smart” spending. Now, if those associations have been hardwired into their heads, hearts, habits and attitudes, watch out. They are likely headed for disaster. Consumer messaging is a gargantuan part of the sound and sight waves kids absorb. By age seven, children easily may have taken in thousands of Chuck E. Cheese, McDonald, Disney “buy this, buy that” messages.
Unfortunately, over exposure to consumer messaging is not the only barrier to kids developing the right money habits. Despite best intentions, parents, schools, and the financial education industry contribute to their challenge as well. A Standard and Poor’s Global Financial Literacy study indicates only about 52% of adults around the world are financially literate. That means consciously or unconsciously, what parents are teaching and role modeling to kids about money is misguided.
Only 21 states require high school students to take financial literacy courses in order to graduate according to a February 2020 CNBC article. So, you won’t find much personal finance education in schools. And, if you do, it comes seven to ten years after kids’ money habits and attitudes are set.
For the most part, the financial education industry has focused its efforts in a manner similar to schools: on teens and college students. This presents an enormous opportunity for any organized group, such as financial advisors, CPA’s, consultants and Human Resource Departments who want to build relationships with parents, grandparents, teachers and nonprofits.
If your group is interested in financial education, make sure your financial planning meetings, communications, blogs and social media posts incorporate messaging on youth financial education. Hold workshops, encourage general saving, saving for goals and saving for college. Share information on earning money, investing, spending smart, giving, credit cards, debit cards, compound interest and the rule of 72. These are core money topics that will help kids build a strong foundation in personal finance.
Be sure to stress habit formation as well as automatic saving, investing and budgeting tools. Habits are powerful for several reasons. But here is a significant one. Their outcomes are predictable. If you prioritize and make a habit of saving you are going to have more liberty and security.
While some may say saving does not make sense at today’s interest rates emphasize it with enthusiasm anyway. Nothing may be more beneficial, especially for a young child. Why? Because the habit of saving benefits kids in areas that transcend finance. Saving money teaches delayed gratification and discipline. Saving money teaches goal setting. Saving money gives a person time to make more thoughtful spending choices. Saving money builds confidence. Saving money let’s a child know his or her future is important and worth investing in.
Sam X Renick is a children’s author, award-winning financial educator and an advocate for children’s financial literacy, and the co-creator of SammyRabbit.com