All posts by Lynne L. Finch

“It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children to manage money as a number starting with kids as young as pre-school and continuing through high school.

Financial Literacy Will Not Teach Your Kids to Pay the Bills

Will your child learn financial literacy in school? Not according to one international report. In fact, American students graded below average and failed to reach a baseline level.

That’s the assessment made by the Organization for Economic Cooperation and Development (OECD). FYI: Of the 18 countries involved the financial literacy winner was China.

To put a different spin on this, let’s look at another subject taught in school: driver’s education. If a teen aces the classroom exam, is he ready to drive a car?

No matter how much kids learn about driving, they do not learn how to drive a car in the classroom. Now let’s apply that to financial literacy. Knowledge is knowing about something.

Knowledge does not translate into skill. Knowing the motorist’s manual does not make a skilled automobile driver. Knowing how to read music does not create a concert pianist. Watching someone to ride a bicycle doesn’t guarantee that a kid won’t lose his balance.

Consequently, knowledge is not skill. To drive a car, play a piano or ride a bike requires skill learned through hands-on practice.

Managing money is also a skill that cannot be learned in the classroom. Kids learn money management through hands-on practice with money.

Financial literacy is not a skill

Today’s kids need to develop a skill called financial competency: the ability to manage one’s money to pay bills on time, make reasoned use of credit (especially credit cards) and to plan for future expenses.

To become competent managing money a child has to practice with real money. Schools don’t provide real money in the classroom.  Parents give their kids real money.

When parents give their kids responsibility, control and ownership of their money kids have many learning opportunities to make day-to-day decisions about a variety of expenses that are meaningful to them. This hands-on decision making  is how kids learn to manage money. But like all skills, money management takes time to develop.

Do you want your kids to have financial literacy or financial competency?

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school.  

 

Six-Year-Old Kid Makes His Own Good Money Decision

Making a money decisionParents! Here’s a true story about a six-year-old boy and his big money decision.

On Saturday morning Sam says to his mother, “I’ve got $7. I want to go shopping to buy something today.”

Mom asks him, “Do you know what you want?”

“No, but I really want to go shopping.”

“Well,” says Mom, “you do know that just because you have money doesn’t mean you have to spend it today.”

“Yeah, but I want to,” says Sam, counting out his money.

Dad says, “I have to go to the mall this afternoon. Want to come along and do your shopping?”

“Sure,” says Sam.

At the store, Sam looks at toys. He looks at games. Then he looks at books. He even looks at clothes.

Then he stands next to his dad and puts his hands  in his pocket. He is making a money decision.

“Let’s go home,” he says dejectedly. Inside the car Dad put his arms around Sam, who looked like he was ready to cry.

Sam took out his $7 and stared at the money. Earlier he had been so excited, but now he was totally deflated.

“I don’t have enough money to buy what I want,” he said.

Dad looked at Sam and said, “You learned an important lesson. And you’re only six-years-old. It took me a lot longer to realize that I didn’t have to spend money just because I had it.”

That night Sam’s parents talked about the “ah-ha” moment that their son had in the store. They realized that Sam was taking ownership of his money when he said, “I don’t have enough money to buy what I want.” He was making his own money decision.

Sam’s parents decided to start giving him a weekly allowance, a regular amount of money he could rely on. Now Sam would have money coming in each week so he could start planning his future spending. Sam would be managing his own money and ready to start making good money decisions.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number starting with kids as young as pre-school and continuing through high school.