Have you had "The Talk” with your child? No, not the birds and bees talk. Or the "this is your brain on drugs” talk. The "money talk.”
Nearly half of Americans learn about personal finance primarily from their parents or at home, reports the 2012 Consumer Financial Literacy Survey. And studies show that repeated early exposure to financial education can increase the likelihood that students will pursue more financial education as time goes on.
But many parents still aren’t teaching these lessons. A new report from the Department of Education shows no improvement in high school seniors’ economic knowledge from six years ago. Other reports indicate 38% of high school seniors say that they are unsure or unprepared to manage their own banking and personal finances and 50% are unsure of how to use a credit card effectively.
Kids should be learning these lessons before high school. Even young children can grasp simple financial lessons. Middle school is a great time to teach money management. This is about the time youth start taking responsibility for their own money as they are starting to have regular jobs like babysitting or mowing lawns.
So, what should a middle school student know?
How to calculate the best deal. We’ve all seen the "save $1 on each if you buy three deal” or "buy 2 get 1 free sale.” But which is really the best deal? A middle school student should be able to figure out which will save the most money, and how much. Teach this when you are out shopping with them. Have them calculate sales and discounts and tell you how which promotion is the best financially.
How to record and analyze expenses. A simple spreadsheet, either electronic like an excel spreadsheet or good old fashioned pencil and paper, works best for this group. Add up your student’s monthly income and expenses. If your student’s expenses are more than their income, find ways to cut back.
Difference between fixed and variable expenses. Students should understand there are some expenses are fixed, which means they will not change month to month, like school lunches or online game memberships, and some expenses that are variable and will change. This helps them recognize that variable expenses can be reduced or cut out altogether if they are exceeding their monthly income levels.
Differentiate between a debit card and a credit card. Students should know that a debit card is money you have. It is deducted from an account at your financial institution. If you don’t have money in the account, you can’t use your debit card. A credit card is used to buy things now and pay for them later (with interest!). If you don’t pay your monthly bill, you could incur fees.
Parents can have the most influence over their children when it comes to developing positive financial attitudes and behaviors, even more than what they learn in school or from their friends.
Use everyday, real situations to instill good financial intentions. Teach at the grocery store. Teach during a commercial advertising a low loan rate. Teach when the student gets their first paycheck, or even, when you get paid. Show them the household budget and explain where the household money goes. Learning together with your child is the best way to encourage fiscal fitness.