Raising entrepreneurs: Financial literacy

Published by Lori Pickert on November 30, 2011 at 02:52 PM

If we want to set our children on a path toward being in control of their learning today and their adult lives in the future, we may as well start with money.

Financial aptitude is about managing money, but it’s also about learning how to set goals that reflect your values and priorities. Values and priorities come first, then goals, then the tough decisions and work to back them up.

Schools don’t teach finance. Every year, we graduate young adults who are financially illiterate. This should be a priority — what could be more basic for helping young people get their adult lives started off on the right foot? How is it that our kids graduate from high school and head to college without a clear understanding of how credit works? How is it that we have teenagers committing to school loans that will be dogging them for years (sometimes decades) without a clear understanding of either the loans (bankruptcy doesn’t erase school loans — they stay with you forever) or what they’re buying (witness all the 20-somethings who are in shock that they can’t find a job, or that their salaries are so low).

How do we teach this? One, transparency. We talk openly about budgets, investments, goals, values. Two, content. Along with the other real-life skills we have to pass on, we make sure they get the financial version of “the talk”. This is what happens when you charge a purchase to a credit card and don’t pay it off right away. This is how compound interest works. This is how a savings account works. This is how the stock market works.

The way we homeschool can affect how our children approach and manage their financial lives. Habits of mind acquired from project-based homeschooling connect directly to financial aptitude:

• the ability to make a plan and see it through,

• the ability to sacrifice in the short term for a long-term gain,

• researching and weighing various opinions,

• managing impulsivity,

and so on.

The most important thing a person needs is confidence — self-assurance that they can learn what they need to know and do the work necessary to achieve their goals. We need to make sure our children acquire that confidence — because it’s the key to everything else they’ll want to do in life — but their confidence must be authentic and based on real experiences. Many teenagers graduate from high school filled with false confidence and make some of their most important life decisions without a clear grasp of how the world works. We need to make sure our children do challenging, meaningful work and build up real thinking and learning skills.

Having a job can be very instructive for teens, but these lessons should — and can — start much earlier. Doing meaningful, long-term project work helps build a foundation of thinking and learning skills and real-life experience with goal-setting and problem-solving.

How important is it to you to teach financial literacy? Do you have a plan for how you’ll teach it?

9 comments

Comment by Jacinda on November 30, 2011 at 07:45 PM

Wow, you are speaking to me Lori, in fact I see the current monetary system mainly built on "false confidence" but that's a different tangent.
It's incredibly important for our family. With the parents having learnt the long, slow way (!) we are keen to share money talk and realities with the girls.
I can see these entrepreneurial posts are going to be challenging (and exciting) for me. We would not call ourselves "entrepreneurial" at all but "community activists" passionate about reimagining how we share and trade in ways other than supporting the, what I see as the collapsing, money system. I'm asking myself, can these 2 coexist? Yes, we realise money is part the picture but what excites us is when it hasn't got a main part in the play. So as you can see I'm looking forward to stretching my thinking with the next few posts.

Comment by Roxy on November 30, 2011 at 10:40 PM

Um, yea. This post is almost a mirror of the conversation my husband and I just had - he's the CEO of a small ag bank. And I currently run grants for schools. And we cannot believe the number of young adults who have absolutely no clue how to live within their means.

As to how to do that, I have no easy response. As my husband and I talked about this, we decided one of the best things we could do is to talk about what we do and share those processes out loud, much like you would strategies for reading comprehension. Our five-year-old has three cups marked save, spend and give, and he gets four quarters each week to disperse among those cups. People are shocked sometimes that he gets an allowance, but our feeling in starting him with this system is not as an allowance for chores or completing tasks. We purposely implemented it as an activity for him to understand the concept of saving and sharing money and knowing that if he wants to buy something extra, he has to have enough in his cup. He might have to wait, or find a few odd jobs from the grandparents if he needs money faster. And if he wants to share his money, he has his own to give to the jar in the grocery store without asking for money from us. All of it makes him immensely proud and we've found since we started this about six months ago that he's quite careful with his spending money and quite generous with his giving.

It's nothing new, but we thought we needed to have a purposeful plan for managing money. In a few years he'll have a 4H calf and he will have to actually take out a loan at the bank to buy it and keep a log of expenses for feed, etc. He'll sell it to pay off his loan and hopefully have a profit to save, spend and give on a larger scale.

Again, nothing new, just surfacing thoughts brought on by your timely post. Thanks.

Comment by Lori Pickert on December 1, 2011 at 01:15 AM

jacinda,

"We would not call ourselves "entrepreneurial" at all but "community activists" passionate about reimagining how we share and trade in [new] ways..."

if you think about *innovation*, then things like tool libraries, shared bicycle/car programs, etc., can be part of how you might help cook up something new for your community. :)

i'm glad you're into this discussion! keep the thoughts coming!

roxy,

"we cannot believe the number of young adults who have absolutely no clue how to live within their means" - i know!

it's really interesting to me that people are shocked your 5yo has an allowance. we've always given small allowances and we never buy our kids anything. lol. we completely avoid the "buy me this!" because they know it's not happening! ;^)

4H is a great thing to bring up — such a great opportunity for rural kids.

thank you for sharing!

Comment by Natasha Tygart on December 1, 2011 at 01:42 AM

So true. We have a business, so, I have a bit of understanding on how finances should be handled and it really helped me a lot especially after school. I was actually able to help my parents refurbish our house.

Comment by shelli on December 1, 2011 at 01:51 AM

Thank you for this post. Teaching my kids financial literacy is very important to me, but I haven't yet figured out how I want to do that. I do talk to my five-year-old about money and tell him when something is too expensive for us to buy, and he understands that. I would love to hear more ideas on how to start this at this early age.

Comment by Dawn Suzette on December 1, 2011 at 03:22 AM

When I taught Marriage and Family in High School I taught budgeting. Two things worried me. The first was that parents did not want to share their budget with their teens. The second was that the teens had no idea how much things cost or even that they would have to pay for services (like trash collection)... this did not surprise me much considering their parents were not sharing any information with their kids. Even some of the teens with jobs did not have a clue. They spent all their money however they wanted (CD's, clothes, etc...) and were getting the message that they would always have the freedom to do so.

This unit was important to me because I was in the dark when I graduated, headed off to college, filled out those handy credit applications they put in the bag when you buy your text books, and took out student loans. Ouch!

I am excited to teach my kids about managing money and never hesitate to say "we can't afford that" or "now that you know how much it costs you know how much to save".

Thanks for these posts Lori!!

Comment by Lori Pickert on December 1, 2011 at 02:35 PM

that's great, natasha!

shelli, we'll see if we can get some good conversation going on this topic. ;^)

dawn, that's really interesting. re: parents not sharing their budgets, i think *lots* of parents don't want to disclose their financial situation to their teens! maybe it's a control issue. i do also think there is so much *shame* attached to money issues. people are deeply embarrassed about their financial mistakes so they bury and avoid instead of accepting and working past it. and we all know financial mistakes can dog you for a looong time.

the teens who don't have a clue about all the things an adult has to pay for reminds me of the classic crosby show skit where dad shows theo how far a salary has to go.

it's funny that kids graduate from high school and go to college without knowing how to cook, how to do laundry (this happens!), and many get all the way to graduation without any experience paying their own bills. i think homeschoolers as a group seem to be more focused on making sure their kids get "life" skills - cooking, etc. - but imagine how educational it would be if teens were in charge of paying all the family bills for six months! (not making the money to pay those bills - just writing the checks! ;^)

those freshman credit card applications .. i remember the credit card companies handing out things like five-pound bags of M&Ms if you'd just sign up for a card with a $500 limit .. so many kids fell for that, immediately ran the card up to its limit, and paid interest for years.

Comment by Tana on December 1, 2011 at 08:08 PM

I saw that kind of money-shame a lot growing up. Not just connected to mistakes either. There seemed to be in my family (and really in my whole hometown community) a kind of shame attached to making "too much" money. In which "too much" was any more than another person. People were all for working hard. But getting paid well for working hard? Not so much. It's weird. I don't understand the logic, but it has definitely coloured my approach to making money.

What all this money-shame meant when I was growing up was that nobody talked about money, at all. I literally had no idea how much a jug of milk cost when I moved out to go to university. No idea how to find and pay for an apartment or utilities. No idea how credit cards worked or how to file my taxes. It was a bad scene.

I am hoping I've prepared my daughter somewhat better.

Comment by Lori Pickert on December 1, 2011 at 10:47 PM

i know that in the old days, it was considered rude to talk about money. and showing off was rude. bit different today...

that rough landing at college with no idea of how to do any of these basic adult tasks is so unnecessary .. our kids have the chance to take these responsibilities over slowly while they're still under our roof .. i'm so familiar with this. you really have to wonder what parents were/are thinking! (maybe they're just in sad denial about their babies moving out?)

it sounds like you've done a much better job of preparing your daughter. :)

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