Teaching kids financial literacy

By Armin Brott/McClatchy-Tribune News Service

Dear Mr. Dad. How do I teach my child about money?

A: When my oldest, now 22, was about a year old, I took her to FAO Schwartz in New York, thinking that she'd have a ball with all the toys and stuffies. But no matter what I pulled off the shelf, she was always far more interested in the price tags than with the toy itself. Twelve or 13 years later, she was still obsessed with price tags, saving up her clothing allowance to buy $150/pair jeans (I get mine at Costco for $12/pair and they fit just fine, thank you). In all the years in between, I can't count the number of times when she, presented with a “No, bunny, I don't want to buy that right now,” would come back with, “Daddy, can't you just get money from one of those machines?”

Sometimes it would be funny - a tiny glimpse into the innocence of childhood. Other times it would be a bit frightening - how on earth could I possibly explain what money is and where it comes from?

Over time, I've tried to teach all three of my kids about money, interest, taxes, savings, and charity. But according to a new study by T. Rowe Price, my family is in the minority.  According to the survey - just in time for Financial Literacy Month (April - 77 percent of parents say they aren't always honest with their kids about money-related items and 15 percent say they lie to their kids about money at least weekly. Forty-three percent of parents don't admit to their children how worried they are about money, one in three plead poverty - telling their kids they can't afford something when they actually can - and a quarter of parents fudge when talking about the family's financial situation.

You've probably heard that a majority of people fear speaking in public more than death. It's pretty much the same with talking about money: parents would rather talk to the kids about drugs, smoking. Overall, they say financial discussions are right up there with talking about sex and puberty.

The study found that while 80 percent of parents say they're equipped to talk about financial goals, savings, and spending responsibly, they don't follow through: Only half teach their children about setting goals for savings, “only 46 percent are teaching about spending/savings trade-offs, and very few are teaching about inflation (19 percent), investing (16 percent), diversification (11 percent), and asset allocation (8%).” Scarier still, the percentages of parents who actually do these things on their own are just about the same.

Oh, and we're a horribly pessimistic lot. “More parents think it's likely a cure for cancer will be developed or that life exists on other planets than think that Social Security, in its current form, will be available by the time either they or their children retire,” the survey found. Jeez, where can I get one of those machines?  

Bottom line: if you don't know enough about money and finance, learn. There are tons of good books out there. And once you have a good grasp of the issues, start teaching your kids. If you don't, you might end up having a conversation like one dad interviewed for the survey did: “My 6-year-old the other day told me, ‘Dad, I want a credit card.'” “And I said, ‘Well, why do you want a credit card?' And she said, ‘Because if you have a credit card you can walk into a store and buy anything you want.'”

Google “Fourth Annual Parents, Kids & Money Survey” for the full study.