Beth Kobliner, Simon & Schuster, New York, 2017.
about the author
Beth Kobliner is an authority on personal finance for youth as shown by her successful publications of a NY Times best-seller book (Get a Fiancial Life), staff writer for Money Magazine, and contributing author to national newspapers. She served on President Obama’s Advisory Council on Financial Capability for Young Americans.
In this book she offers financial advice for 6 age groups: pre-school, elementary school, middle school, high school, college, and young adult. Much of her advice is based on academic studies. It’s not a textbook for children.
relevant topics for children
Most parents will discuss any topic except money; yet parents are the principal influence on their kids’ financial behavior. Many of a child’s money habits are set by age 7. This book discribes useful ways (called “teachable moments”) for talking about money with children as they grow from age 3 to young adult. Here are the author’s general comments about relevant topics for all ages:
TRUST: Parents need to build the trust of their pre-school children by following through on parental promises.
PATIENCE: Some children are impulsive, others are patient. Patient people tend to save more money! Pre-schoolers can be taught to wait for things.
CHARITY: Raise a generous child. Sharing time and money allows children to feel grateful for what they have. They are ready to show kindness by age 4. Elementary school children begin to understand the needs of others. Teen volunteers can engage in community service for their school and community. Most college students won’t have spare money, but they can donate their time. It allows them to explore the nonprofit world. Parents should honor their child’s charitable work with the same committment as other achievements in life; but, don’t overpraise their charitable efforts.
ALLOWANCE: It doesn’t matter if you give your elementary school child an allowance, but if you do, don’t make household chores a pre-requisite for receiving the allowance, use the allowance to set spending rules, and give them control of their spending decisions.
WORK: Children need to do unpaid chores and do well in school. Advanced chores such as raking leaves and doing laundry are essential to raising a self-reliant child. Elementary school children want to earn money, in which case the parent decides whether or not to pay the child for special chores. Middle school children are able to earn money. Limit the high school student’s work week to 15 hours; school is more important.
DEBT: Start teaching the basic concepts of debt to pre-school children. Middle school children need to understand the minimum monthly payments of credit card debt and protect themselves from identity theft. High schoolers are interested in car loans and credit cards; prepare them for wise use of credit cards. Parents, don’t buy your child a car or cosign for a car loan! After college, adult children are likely to have student-loan debt, car debt, or credit card debt. Parents should neither dip into their own retirement savings nor cosign for a loan as ways of helping young adults manage debt!
SHOPPING: Children want to buy stuff without limits, so parents need to start setting spending limits on pre-school children and teach the concept of ‘living within your means’. Elementary school children how to avoid being victimized by advertising and peer pressure. Tweens should spend their own money, not their parents’. If a teen prefers to spend for personal items rather than save money, they should learn from mistaken purchases. The ‘money culture’ among college students with different incomes can produce embarassment, resentment, and other strong feelings. Emphasize that college-related expenses are essential and everything else is extra.
SAVING: Parents should not raid their child’s savings. Middle school children should have a supersafe account (e.g., savings account, money market account, or CD). High school students should save for college, it will boost their motivation. Young adults should have an emergency fund and make maximal 401K deposits.
INSURANCE: Insurance is necessary for financial protection against devastating expenses. Most bankruptcies result from unpaid medical bills. Teens should pay for their car insurance and minimize their insurance rate with a good driving record. College students must have health insurance for the rest of their lives.
INVESTING: Don’t postpone the habit of investing in stocks; it’s a good way to protect against inflation. Children should learn the fundamentals and start saving small amounts at a young age. When they are old enough to understand numbers and show an interest in how money ‘grows,’ provide them with numeric examples of compound interest. High schoolers should open a Roth IRA to begin growing money.
COLLEGE: Attending college is the best pathway to earning higher wages compared to entering the workforce with a high school diploma. Middle school is the time to start talking about college and high school is the time to prepare for the college admissions process. High schoolers are advised to save for college; their chores should give way to college prep and testing. Avoid large student loans by chosing a good, inexpensive college and doing a better search for grants and scholarships. There are 3 ways to save for college:
- 529 Savings Plan. the earnings are tax-free for educational purposes and there is no income cap for donations. If your child rejects the plan’s participating schools, then rollover the savings to another education account, change the beneficiary to another child, or withdraw the savings with penalties.
- Coverdell Account. the earnings are tax-free for educational purposes, but the annual contribution is limited to $2,000 when a married couple earns less than $220,000 annually. The savings can be used for elementary school and high school educational purposes.
- Custodial accounts are available at banks and mutual funds. If the child’s earnings exceed $1,050, they are taxed at the child’s tax rate for the next $1,050, then at the parent’s tax rate for higher amounts until age 19 (age 24 for full time students). Colleges count the account balance as the child’s asset and expect 20% of the balance to go toward college expenses. That means less aid for the family.
The college student’s priorities are studies, a paying job [working students feel more invested in their education!], and employment after college. Does your college graduate want to start a career or go to grad school? Parents, don’t jeopardize your financial security to pay for their grad school.
the author’s curriculum and activities for pre-school children
EXPLAIN PATIENCE. Patience, trust, and generosity are personal traits that facilitate financial success; pre-school training should help develop those traits. Impulse buying reduces funds for tomorrow’s purchase! Always consider tomorrow’s purchases before buying on impulse.
Teach your children to perservere. Explain that you can’t always get what you want! Advise them to be patient (‘self control’) and wait for something.
EXPLAIN WORK. Instill a work ethic; chores are a part of life. Explain how you work to earn money Convey the idea that a job is a source of pride and dignity
EXPLAIN SHOPPING. Explain that you have to pay for things in cash (money, check) or card (debit, credit); the credit card is one way to pay (at the risk of incurring debt!). Teach them to distrust advertising! Explain how ads are produced with actors, scripts, colors, etc. Explain the risks of materialism
DISCUSS CHARITY. Be respectful of families with different levels of household income by explaining that “some people have plenty and others not enough”. Help bring your child closer to people of need by avoiding the terms “poor” and “rich” when discussing family wealth.
Worthy causes? Maybe your child needs guidance. What would they like to change in the world? Who would they like to help?
DESCRIBE THE HISTORY OF INSURANCE. Ancient shipowners created a fund to pay for losses from shipwrecks. Their bookkeeper became the insurance company.
INTRODUCE INVESTING. The basic concept of investing is to spend time and effort to produce something good (e.g., turning flour into bread).
PRACTICE PATIENCE. Encourage them against skipping to the head of the line. Discuss a communal effort (e.g., family savings pot) to save for a family reward (pizza, water park, etc.)
LEARN ABOUT WORK. Perform household chores. Discuss the jobs of people you know.
DISCUSS CHARITY. Consider these charities: heifer.org , nokidhungry.org , kaboom.org , nature.org , pencilsofpromise.org , donorschoose.org.
general goals after pre-school
ELEMENTARY SCHOOL. Continue the development of personal traits by adding an adult perspective on respect for other people. School children need to start managing their money and protecting it. They are vulnerable to harmful attack from many directions, including identity theft from their online accounts. Give parental guidance.
MIDDLE SCHOOL. Tweens are vulnerable to marketing campaigns, overspending, and credit card debt. Give parental guidance.
HIGH SCHOOL. Reduce the time spent on household chores. The teen’s main job is graduating from high school with a good education. Teen’s also need to prepare for higher education or entering the workforce. Give parental guidance.
Kobliner’s book contains credible advice for the homeshooling of children in financial matters. There is much more information in her book than I’ve been able to summarize in this article. Be sure to visit her web site, “Money as You Grow”, for additional help and perspective (https://www.consumerfinance.gov/consumer-tools/money-as-you-grow/.