From creating savings, spending, and give-away jars, to explaining taxes by way of grandma or the neighborhood fire department, lessons about money need to be relatable to your child’s life. At least that’s how David Pickler—director of the American Public Education Foundation (APEF)—sees it.
Children and teens also look up to parents as their example—their very first example—of how to handle money, Pickler told The Balance.
“I think if a parent is able to not just talk the talk, but I mean actually walk the walk, and actually display that good behavior and those good disciplines, that can really influence children,” he said.
In addition to leading APEF in its efforts to promote high-quality public education in U.S.schools, Pickler is a wealth advisor, attorney, and financial planner. Through his various roles, he’s made money management a priority, and his own childhood showed him first-hand how crucial it is to introduce basic financial literacy lessons at a young age.
To help parents teach kids of all ages about money, we talked with Pickler about the importance of accountability, early conversations, and showing teens a side of money they can relate to.
This interview has been edited for length and clarity.
Making Money Relatable
How do you recommend parents discuss the concept of saving, and creating financial goals to help teens really 'get it?'
For most people, there are [typically] three things they want to do with their money: there's something that they want to spend it on, there's something they want to save for, and there's something they choose—based upon their values—to give away. Based on that, I think that's where parents can say, ‘All right, every week I'm going to give you some money for these things, and you're going to make choices.’
And then actually make them spend the money and make decisions. Perhaps they use the jar method to set financial goals. Then by the time that they start to work, they have a basic understanding about what taxes are and how they can save toward their goals, which is really effectively paying themselves. It’s just about making it real. Make it tangible and make it relevant in each child's life, and hopefully that'll begin to resonate.
Based on our research, taxes tend to be a confusing topic for teens and young adults, but it's also a topic they want to know more about. So, when teens start earning money, how can parents start a conversation about taxes and break down the complexities?
It's always a shocking thing, the first time a kid brings home a paycheck, and they're reeling, ‘I thought I was making this amount of money and once those withholdings are out and the taxes are paid, then I'm getting a whole lot less!’ Again I think it starts with giving them a basic understanding of what things we pay for with our money, and what things are paid for by the government. How are those tax dollars used? We can certainly always argue whether used properly or not used properly, or whatever, but I think they often need an understanding of the basic role of the government and the basic role of business.
You can give them a basic understanding about what some of these government services are, too, using real-life examples. ‘We're going to visit granny, and you know granny doesn't work anymore, but she gets a check every month from the government because when she was our age and she was going to work, they would take a little bit of money out of every paycheck and sock it away here so that she would have a check every month when she was older.’ It’s important to talk about it in ways that are meaningful to kids, rooted in their own family's experience.
Just 21 states require high school students to take a course in personal finance, according to 2020 data. However, nearly 50% of high school seniors surveyed in 2018 said they wish they learned personal finance in school prior to attending university or entering the workforce.
What can the parents do to fill financial literacy gaps that kids don’t necessarily get in school?
Let’s start with an example: I have a 6-year-old granddaughter. When she was 4, my son and daughter-in-law put three jars in her room and they gave her a little allowance. One jar was a save jar, one jar was a spend jar, and one jar was a give-away jar. Literally, every week when she got her allowance—I think it was maybe three quarters or four quarters—she had to put a certain amount in each one of those jars. So whenever she wanted to buy something, they would say, ‘Well, how much do you have in your spend jar?’
Start with these things at the earliest ages. You can give kids an education on finance by talking about the tooth fairy! It's some of the most basic levels of economics. If you want to get the tooth fairy to pay you, then you actually have to cough up the tooth, and you have to save it. My same granddaughter, apparently in her sleep, swallowed one of the teeth, and so Mom and Dad said, ‘Sorry, the tooth fairy didn't come. The one that you swallowed, you've got to hang on to it.’
It doesn't have to be elaborate, but there are a tremendous number of tools that are out there that can begin to talk to kids about money. The problem for so many parents is, they don't feel [right] talking to their kids about money, because they never felt that they've had a good background.
The Power of Behavior
If a parent doesn’t feel confident talking about money, for any reason, where should they start?
Parents don't have to have a very complicated or extensive financial education. Each and every day, there are opportunities for us to share basic information. There are things like when they go to a grocery store, or they go to a quick pump, or when a person at the cashier is handing you a bill—talk to [your teens] about how you deal with this.
The reality is that anything a parent can do, they can share their experience or provide a teaching tool. For many kids, it could be something as simple as an allowance to help develop an understanding of the connection between doing certain chores or work and earning a financial reward. But also, there's got to be consistency. If they don't do that, they don't get paid. They don't show up with the tooth, the tooth fairy doesn't show up for them.
According to a 2020 report from GoHenry, a digital platform that helps introduce children to money, the average weekly allowance for American kids and teens is $9.15, however, this amount will vary by family.
Do you have any standout memories of how your parents either did or didn't teach you about money management?
My parents did not have good financial discipline, and so they actually were a bit of a negative example for me. I had always been kind of a self-starter, [I was] mowing yards to make extra money and doing different things. I always remember collecting Coke bottles and turning those in, too. I was always doing that because it became fairly obvious to me, my parents didn't have a lot of extra money, and I had things to start saving for. I'll never forget, when I was about 10 years old, my father actually came to me and asked for a loan. He was having some financial difficulties, and he actually said, ‘I'm going to pay you back for this at some point,’ but he never did.
That's stuck with me to this very day. So for me, my father was a negative influence in terms of [showing] me what not to do. Whether it be a positive influence or a negative influence, these experiences are very impactful for kids. In some cases, if parents manifest irresponsible behavior, children may choose to mirror that, in other cases children may choose to reject that. I'm probably more the exception than the rule in terms of how I did that, but I do think that what parents do is clearly incredibly influential on them.