In a recent survey by JumpStart Coalition for Financial Literacy, only 26 percent of those between the ages of 13-21 said that they had been taught how to manage money. Yet, when they turn 18, kids are signing contracts for student loans, opening credit card accounts, and in many instances, living away from home with little financial guidance available.

We have a list of classes that kids need to pass in order to graduate from high school, but financial literacy is nowhere on that list.  Yet we expect every 18-year-old to understand the terms of their student loans, credit cards, and the banking system.

A lack of financial literacy in school leaves it up to parents to teach their kids financial management, the earlier the better. Here are a few topics to cover:

Want Versus Need

How many times have you seen a child have a meltdown in the middle of the grocery store because Mom or Dad refused to buy them a toy, or a candy bar, or a cookie - you get the idea.  By the time kids are seven or eight, they can certainly understand that things like food, shelter, and clothing are needs, while the latest toy is a want. It’s also important to teach kids that wanting an item is not wrong, but that needs always come before wants.

Money is Finite

Even the wealthiest of us have a finite amount of resources, meaning that we all need to stick to a budget. One great way to illustrate this is to let your child go grocery shopping. Give them a list and some money, and have them pick out and pay for everything on the list. Do not help them out if they go over – they will simply have to choose something to put back if they don’t have enough money to pay for everything.

Paying Bills

While it may be many years before your middle schooler will need to pay their own monthly bills, have them sit with you while you pay the bills. Explain how much money you have in income and let them look at each of the bills that need to be paid.  Hopefully this exercise will help them understand that things like satellite TV, cell phones, and even a place to live all cost money, and that you need to have sufficient income in order to pay those bills.

The True Value of Money

While we all want to protect our kids, sometimes letting them make unwise purchases will explain to them much better than we can how quickly we can spend money, and how easy it is to wind up with a useless, broken, unnecessary item.  Step back and let them make their purchase anyway.

How Credit Cards Really Work

To young adults, a credit card can seem like a miracle, allowing you to buy something that doesn’t require cash. While credit cards and other credit purchases such as cars, homes, and even education can benefit from having credit, make sure your kids understand that the inability to pay down a credit card or a student loan on a timely basis can destroy their creditworthiness for years.

While high school helps to prepare kids for college or trade school, financial literacy helps prepare kids for the real world.  It’s a valuable lesson that should not be skipped.

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