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.