Teaching money to kids: the essential financial skills they need to know before adulthood.
This article was sponsored by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001. www.MassMutual.com. All opinions are those of the author.
The Most Important Thing my Dad Taught Me Growing Up
In our family, my dad was the “money guy.” It’s a role that I’ve taken on in my own family, so I’m incredibly grateful for all I learned through watching him manage our finances. I’m even grateful for the example my dad set by saying “NO” to many of my childhood and teenage requests.
Though at the time I made those requests, I wasn’t nearly as appreciative!
I remember asking my dad for things like a big-screen TV or a new car when I learned to drive:
Half the kids in my class have a car…why can’t I? How come their parents can afford it and you can’t?
My dad’s response was blunt (but as an adult I’ve learned that he was totally on-point):
Their parents are probably in debt.
It didn’t make complete sense back then – why was debt such a bad thing if my classmates and their families had all kinds of cool “stuff?”
But let me tell you, as an adult I am so glad that I learned the perils of debt early and how to avoid risky financial situations! Because of my dad’s example (and saying “NO” to some of my wants), I’ve been able to provide for our family, build savings, and even repair my husband’s credit.
So if I never said it before, thanks Dad!!
However, not all kids are learning those important skills at home. In fact, just 43 percent of parents describe themselves as ‘well prepared’ for money conversations.
Most schools don’t offer comprehensive money management classes either (I think I took one single economics class in ALL of my educational career!)
If they’re not getting financial education at home, where are kids going to learn these vital life skills?
Teaching Money to Kids with MassMutual and Hill Harper
My husband and I sat in on the MassMutual FutureSmart Houston arena event, held at the Toyota Center (home of the Houston Rockets). Along with over 2000 middle school students from 23 Houston-area schools we listened to actor and entrepreneur Hill Harper enthusiastically explain smart money concepts in a way that made kids want to listen.
For me, it was like a trip down memory lane — these were all the lessons my dad taught me over the course of my lifetime — crammed into one action-packed hour!
There were performances by the Houston Launch Crew dance team, special guest speakers, and even prizes (cash money!) for trivia questions. All to drive home the importance of being smart about money – starting NOW.
Even as an adult, I actually learned a few new things and some surprising statistics. I could tell that the kids in attendance had a great time and I know that some of that information definitely had to stick for them like it did for me.
What Kids Need to Know About Money BEFORE they Reach Adulthood
Hill Harper outlined five challenges that all kids need to do before becoming adults:
Challenge #1 – Learn & engage
It’s natural for kids to look up to athletes and celebrities that they watch and admire. However, Hill Harper pointed out that CEOs and business owners should also be the role models we promote to our children.
Here’s a look at the numbers:
The average NBA player makes $6.3 million a year and has a career that lasts 5 years. Definitely not too shabby!
However, the average Fortune 500 CEO makes $13.1 million a year and has a career that spans 40 years — that is a HUGE difference in lifetime earning potential!
Plus, becoming a business leader doesn’t have the physical requirements that exclude most of us from becoming basketball stars.
By finding examples that are relevant to kids, they are more likely to want to learn about smart money habits and how these tools can impact their own lives.
Challenge #2 – Build a blueprint
You’re much more likely to succeed at anything in life if you first make a plan.
Special guest, Houston Rockets legend Maurice “Mo” Williams shared how he created a blueprint as a kid to go to college. Williams grew up in a family of limited financial means, so paying for his dream school was out of the question. Instead, Williams identified a talent (basketball) that could help him earn a scholarship.
Next, Williams created a plan to nurture his talent, including a rigorous daily practice schedule. It paid off — Williams received a full basketball scholarship to the University of Michigan and the rest is history!
Every individual’s blueprint will be different, but the principal is the same: set a long-term goal with specific, actionable steps to get there.
Challenge #3 – Talk with your family
My dad set an example of financial responsibility that I didn’t always appreciate as a kid. However, those lessons helped to make sure that I knew how to handle my money as an adult.
Through the Future Smart program, kids are encouraged to talk to their family about money — whether it is building a savings account or planning for college.
The best way to learn is to ask — find out what your family is doing to prepare for the future. If the answer is “nothing,” Hill Harper encouraged kids to be their own best example — we don’t have to make the same mistakes as our family members.
Challenge #4 – Think before you spend
As a kid and teen, it’s natural to want what our friends have or what we see on TV. I remember asking my dad why I couldn’t get a new car when I turned 16 — it seemed so unfair that some kids got cars and I didn’t!
One of the most eye-opening parts of the FutureSmart program is where kids learn to identify “Smart Money” versus “Dumb Money.”
“Smart” money refers to things that are necessary for living or maintain their value in the long-run. This includes daily essentials like food, water, and electricity, as well as long-term investments that hold or gain value over time.
“Dumb” money refers to impulse purchases and things that lose value quickly or cause you to incur high-interest debt. These expenditures are “wants” as opposed to things we truly need. Designer clothes, video games, etc. fall into this category. So do high-interest payment schemes like rent-to-own and payday loans.
The bottom line: if you can’t afford to buy something in full OR it is not a necessity, SKIP it.
Challenge #5 – Open a student savings account
Did you know that 62% of Americans have less than $1000 in savings? That’s likely not even enough to cover a month of expenses in case of an emergency.
Hill Harper encouraged kids to set up their own savings accounts and get into the habit of saving early.
Learn More About FutureSmart
As Hill Harper pointed out, education is the number one deciding factor for future success. That’s why the goal of the FutureSmart program is teaching money to kids by bringing critical financial education to middle and high school students across the United States. If they learn smart money lessons early, kids are more likely to carry those lessons into adulthood.
MassMutual hopes to reach 2 million kids and families by the year 2020 through the FutureSmart program.