6 Steps to Help Kids Learn Money (While the Feds Study Studies)

Last Updated Jan 28, 2011 11:40 AM EST

OMG. This is going take a while.

That was my single blinding thought after the first meeting this year of the Financial Literacy and Education Commission in Washington DC. This body, first empanelled in 2003 and charged with developing our national strategy for financial education, evinces no sense of urgency. Asked for progress reports, committee member after committee member basically said they were studying studies.

This is government. I get it. Nothing moves fast. And the commission is smartly focusing on finding teaching-money solutions that deliver provable results. Those aren't easy to find. How do you document the link between a personal finance course in high school and one's ability to live within their means as an adult?

Meanwhile, there is a lot of material surfacing to suggest that teaching kids (and adults) about money is all a waste of time. So it's hard to blame the Commission for being careful.

Still, as a nation we've been officially attacking this issue for nearly a decade. We have recognized the crying need to raise kids in a way that they'll know the risks of credit cards, payday loans, interest-only mortgages and confusing cell-phone plans. We need to move beyond studies. There are some 1,400 of them out there already. It's time to act.

Australia began this year to phase in a federally mandated personal finance curriculum in its schools, grades K-10. They are moving toward every kid being taught and tested on money matters. In the U.S. we are running the other way, leaving states to decide. At last count, only 13 states required a personal finance course to graduate from high school. The number of states requiring testing in student knowledge of economics is actually declining, to 19 in 2009 from 23 in 2007.

I don't care how inconclusive the data are. Common sense should tell us the more that kids are exposed to financial concepts the easier it will be for them to learn how to make sound financial decisions later on. What are we waiting for?

The Commission has some good ideas:

  • Under the leadership of Holly Patraeus, wife of General David Patraeus, the Commission will examine the effectiveness of money education on military bases, where the government has firm control over the environment. The idea is to see what works and extend it to the population as a whole. By the way, military personnel "unanimously" agree that personal finance classes on the base should be mandatory. (Why not in all schools?)
  • The National Credit Union Association is testing ways to turn consumer complaints into educational opportunities. One way to do this is offer fuller explanations of mistakes that may have led to the complaint and give specific advice on how to correct the mistake.
  • The Treasury will spread the word about its mymoney.gov website, which is loaded with helpful consumer financial information, via flyers accompanying some 2.5 million tax refunds. Presumably it will also improve the website's features and navigation, which in a survey of users got poor marks.
Obviously, none of this will help you right now. Concerned parents will need to pick up the slack at home for the foreseeable future. So:
  • Talk with your kids about money.
  • Show them the credit card bill for things you came home with last month.
  • Put them on a strict allowance and when they need more money give them a chance to earn it by running errands, shoveling snow or filing papers at your office.
  • Help them budget with the 10-10-10 rule. Save 10 percent. Invest 10 percent. Give 10 percent. Live on the remaining 70%.
  • Discuss TV commercials selling things they may want but do not need.
  • If they are older and have taxable income, open a Roth IRA in their name and encourage them to contribute to it with a parental match. I call this a family 401(k) and recently set one up for my two college student kids.
Momentum is building in government to find a solution for financial education in our schools. That's good. But it's going to take a very long time for this effort to make a dent. Your kids will be grown and gone. So I suggest you take matters into your own hands and get started today.

Photo courtesy Flickr user ustreasury
More on MarketWatch:
· Kids and Credit Cards: Five Trends To Watch
· Credit Cards for College: Co-Sign or Authorized User?
· 10 Ways to Set a Good Spending Example
· Top 5 Money Lessons for Older Kids
· Start Them Early with a Family 401(k)

  • Dan Kadlec

    Daniel J. Kadlec is an author and journalist whose work appears regularly in Time and Money magazines. He is the former editor of Time’s Generations section, which was written and edited for boomers. Kadlec came to Time from USA Today, where he was the creator and author of the daily column Street Talk, which anchored the newspaper's business coverage. He has co-written three books, including, most recently, With Purpose: Going from Success to Significance in Work and Life. He has won a New York Press Club award and a National Headliner Award for columns on the economy and investing.