Beginning Financial Literacy
I never thought too much about introducing young kids to the financial world, but, about a year and a half ago when my son had just turned six, he first opened the topic himself. This made me realize that age may not be the guiding factor when deciding to speak to kids about finance related topics.
There was a brief period (lasting about a week) where my son repeatedly asked me to buy him multiple toys. The answer each time was NO. He didn’t understand why I couldn’t just buy him an abundance of toys. I realized he was not going to let the subject go. For the time being, I chose to bypass the life lesson of why abundance of toys might not be best for him, and instead catered to his deep understanding of numbers. I took him through a made-up, easy-to-follow monthly budget.
I said, “Well, each month I have $1,000 to spend on our household. Groceries cost $X, gas costs $X, utilities cost $X, and as you can see, we don’t have an abundance of funds for multiple toys each week; we have enough for a few miscellaneous things such as family night out. That is why toys are gifts for special occasions/birthdays/holidays.” I felt as if he did understand me. He didn’t say anything, just gave a slight nod and walked away. He didn’t ask for toys that week. I gave myself a pat on the back.
A few days later he asked me what I did for a living. It was the first time he had asked me that. I said I am in finance, and I explained that finance is related to money. He thought about that and said, “I don’t think you are good at finance.” I looked at this six-year-old judging me, held my laughter, and I asked him why he thought I was not good at finance.
He said, “If you say you are in finance, then you should be good at money, but you don’t have any money saved.”
I then realized that while talking about the budget I hadn’t tackled the topic of savings. Then again, I did not expect my six-year-old to think so deeply about money.
Pretending not to improvise, I said, “I do have savings!” He asked how much I had saved up. I made up an arbitrary number that he would understand, yet be impressed by (because my ego had to prove to my six-year old that I am good at finance after all).
I said, “I have $100K saved up.” His eyes lit up. Then I quickly followed up stating that the savings are tucked away in our savings account for the future, for things such as college. He said OK and walked away. Again, I gave myself pat on the back.
A few days later he came back to me and said, “I still think you are not good at finance.”
I wanted to say, “Come on, let this go already!!”, but instead I forced a smile and said, “OK, why do you think that this time?”
He said, “Well, you have money saved, but you have not grown it.” I was taken back. How did this six-year-old even think to ask about financial growth?
So, to save my ego I said, “Of course I grew my money. I now have $100,001.” He looked very satisfied that I had grown my money by a whole $1.
This situation, which took days to unravel, made me realize my high-energy, highly curious gifted son was ready to learn about money and how it works in the real world. He was asking meaningful questions and I felt I shouldn’t evade the topic due to his age. I started introducing him to small concepts such as price. For example, when we were at the airport, I showed him the price difference between the airport snack and what that same exact snack costs at Target using the app (an approximate 1.5x-2x price difference). I also introduced him to my business’ profit and loss statement. He saw what comes in, what goes out, and how the end of the month can even be in the negative. He started linking pieces of information together. Then, to demonstrate the flow of money, I gave him a small pool of funds to purchase whatever he wanted. Excited with his new liberty, he went on a mini-spree and quickly saw how money can diminish. Since then, he has earned tooth fairy money, which has remained unspent since September. I am curious to see what the next financial move is for my now seven-year-old. It has been exciting to see him learn and uncover concepts that would not be comprehensible if he did not have the practical experience too.
When I look up activities for the gifted, I often come across a variety of creative ideas, but financial literacy (an essential life skill) related items are not common. Of course, there are board games such as Monopoly, Game of Life, and Buy It Right that introduce money management and critical thinking, but the hands-on approach for kids who grasp concepts and numbers at a higher level might be more valuable.
The moral of the story for me is to take the time to explain and explore these concepts as they come up in your child’s life. It is never too early to begin lessons on financial literacy.
Ayesha Penesetti, WATG Board Treasurer