Fun Ways to Teach Financial Literacy to Kids This?Summer

How are kids experiencing our current economic shocks? Odds are it is through social media, their friends… and their homes. Lifestyles are changing across the board and at every level. So, let’s see what our kids know, what they don’t, and (importantly) how they feel, so we can support them as our global landscape shifts.

Ultimately, children worry when adults worry. They hear caregivers talking about needing to cut back on purchases, but they may not understand why. This can be very scary to children if they don’t have basic financial knowledge. It’s hard to understand why there aren’t any more extra snacks in the house or movies on weekends. Lack of financial knowledge can also have painful consequences in the long term including chronic low credit score, severe debt-to-income ratio, poor health due to diet and stress, and bankruptcy (National Financial Educators Council, 2021).

As with many other topics, when children have questions about money and finance they often turn to social media.

Social Media (Mis)Information

For better or for worse, there is no shortage of influencers online vying for the attention of youth. Sometimes the information they provide is accurate, but other times it is not. Without basic financial knowledge, children can fall prey to false claims which can be catastrophic to their future financial wellbeing.

From YouTube to TikTok, young people are searching for answers. In many cases, they are searching for ways to make more money rather than how to properly manage the funds they do have. While there is no harm or shame in making more money, without verified information they can find themselves embroiled in pyramid schemes or life insurance scams. In 2021, 95,000 people reported $770?million?in losses to schemes on social media (Federal Trade Commission, 2021). Social media is a low-cost way for scam artists to target young, impressionable, unsuspecting prey.

Add to this the current confusion and misinformation surrounding cryptocurrency, NFTs, and the gig economy. Without informed adults working to support them with knowledge at home and school, young people can find themselves in very scary situations from very young ages.

According to the Work Force Institute, half of Gen Z around the world prefer to earn all their money by working full-time in the gig economy because it offers them schedule flexibility and the option to be their own boss (Work Force Institute, 2019). What they may not realize is the cost of working in this time of economy. In the US for example, depending on the state you reside in, close to 40% of your income as a 1099 employee must be reserved for taxes. Gig economies are also at the mercy of the economy writ large which significantly impacts the predictability of income. Consider our current predicament. Families are cutting back on Uber and Door Dash in the face of a recession which will disproportionately impact workers relying on those services for their income.

Your Homework: What to Do at?Home

The first step to teaching financial literacy is to do some homework. Learn what is being taught (and when) to children at school. It varies widely by state, school, and grade, so it may be easiest to start with the Department of Education website or call the guidance office at your student’s school to ask for an overview of the curriculum used. From here, you can identify areas the school is doing well and areas you likely need to supplement.

Armed with this information, you can begin planning activities to do together with the end in mind. Start with a conversation about quality of life and standard of living. What type of lifestyle do your children aspire to? They should learn early what they will need to earn if they wish to live in a beachfront mansion and retire early. These conversations are fun, informative, and serve to level-set financial expectations. More than likely, kids are unaware of how much money they need to earn (and thus which career to prepare for) to achieve the lifestyle they wish to have.

From there, seek opportunities to teach them about considerations they will need in their personal lives including closing costs when purchasing a home, fixed vs. variable interest, investment options, sales tax on big-ticket items like vehicles, leasing/renting versus purchasing (equity), and tax rates for entrepreneurs, freelancers, and gig economy workers.

7 Fun, Smart Activities to Supplement Your Children’s Financial Knowledge

1. Chat with financial planners together. You could even get a group of parents together in your community and plan an evening of it with your children.
2. Find people and organizations to follow on social media who have established financial chops. It is imperative you vet them first because there is no shortage of scammy influencers, but there are very good ones in the mix. I personally like @pivot_podcast on Tik Tok — and their podcast too of course.
3. Dig in and discuss the headlines in the news — do?not?shy away from them. Even if they are scary or confusing. Take the time to discuss what a recession means, how a bear market impacts retirement accounts, and why interest rates are going up so quickly. Normalize being financially savvy.
4. Encourage frugality and thoughtful consumer spending. No one truly needs luxury items that cost a fortune not to mention the amount of food waste and plastic harming the Earth. Focus on essentials.
5. Create a financial plan together with a goal in mind. It may be difficult for kids to think of retirement, but you could put a plan in place with the goal of taking a cool trip together. Lessons are learned and there is a fun prize at the end.
6. Watch accurate films about finance together. My personal favorite is?The Big Short?about the 2008 financial crisis, but there are many others. Write a list and make some popcorn!
7. Support kids in getting a job early. They don’t need to participate in every extracurricular under the sun. Find balance and get them working so they begin earning and putting these lessons into motion. Not only will they begin earning money and making financial decisions, but they will also learn interview skills and how to work for (and with) managers.

Conclusion

One of my favorite parts of sharing lessons like these with my children is that, despite seeing myself as the teacher in these situations, they inevitably teach me something along the way I hadn’t even considered.

Happy learning!

References

Federal Trade Commission. (2021). Social Media a Gold Mine for Scammers in 2021. FTC.?https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2022/01/social-media-gold-mine-scammers-2021 .

National Financial Educators Council. (2021). Financial Illiteracy Costs: Causes and consequences. NFEC.?https://www.financialeducatorscouncil.org/financial-illiteracy-costs/ .

Work Force Institute. (2019). Gen Z and the Gig Economy. Kronos.?https://workforceinstitute.org/wp-content/uploads/2019/09/Gen-Z-and-the-Gig-Economy-Its-Time-to-Gig-In-or-Get-Out.pdf .