If kids can toddle, they can learn about money

Early lessons can pay off later, but know what to teach and when

Most American students don’t gain much exposure to spending, saving, budgeting, debt, investing and so on in the classroom. Reading, writing, math and other core subjects are priorities. Personal-finance issues, while highly applicable to real life, take a back seat.

That creates opportunities for parents, grandparents and others to lend a hand. But which lessons should instructors focus on, and at what ages?

Some money lessons can start at early ages, when children are in grade school and perhaps sooner. Even toddlers can start learning that money is a medium of exchange, is divided into different types of coins and currency and can be saved to buy desirable objects, notes Billy Hensley, director of education at the National Endowment for Financial Education.

Because attention spans are short and financial flexibility limited at this age, goals should be modest. This can mean saving for a box of crayons rather than, say, a bike, Hensley suggests.

By grade school, youngsters can learn to spend and shop, set more elaborate goals and set up savings accounts, using lowminimum options offered by many banks and credit unions.

They also can start to gain an appreciation of how parents work to earn money that pays the bills. Parents also can start a discussion about needs and wants. Allowances can help teach children how to manage money.

“Many experts believe that it is more effective to use the al- lowance only as a means of teaching money management — not as a source of reward and punishment or as a means of control,” Hensley said.

By the time a kid becomes a teen, money discussions can ramp up further. Darlene Abel, a recently retired junior high teacher in Chandler, Ariz., believes age 13 or so is a good time to teach financial principles.

“They’re old enough now to start looking beyond themselves, at the broader world,” Abel said. Her instruction included the Stock Market Game.

“To help them figure out which stocks to buy, I had them look at what they ’re interested in,” said Abel, who taught the Stock Market Game for six years. For example, she had one girl go home and check all the labels on her clothes so she could see which companies made them, and where.

Abel supplemented that with discussions about how credit cards work, budgeting, paying taxes, buying insurance and planning for the future.

Money skills “make a difference in how well they live the rest of their lives,” she said.

Topics suitable for teens include managing checking accounts and paying taxes. Kids at this stage also should learn how to pace their spending so parents aren’t always bailing them out, Hensley said. It’s also a time to show how compound interest can work in favor of savers and against borrowers. It might be an opportunity to discuss how money factors into peer pressures, Hensley noted.

For college students and other young adults, learning how to manage credit card and other debts becomes important.

This is also the age to start checking your credit report. Everyone can receive free personal reports through annualcredit report.com.

Jacob Gold, a certified finan- cial planner who teaches finance at Arizona State University, notes that many young adults are getting off to a poor start, burdened by student loans and credit card debt. “We live in a society where everyone seeks instant gratification,” he said. Yet a reliance on debt can turn into “heavy baggage.”

People in this age group need to learn how to live within their means and work toward accumulating three to six months of living expenses for emergencies, he said. They also should be aware of insurance basics, especially if shopping for auto, renters and health policies, and of the power of compound interest as they start investing.

Young adults should build up a working knowledge of the stock market and how asset allocation and diversification fit into that, Gold said. They also should get to know how workplace retirement plans operate and participate in them, especially if offered matching funds. It’s also a good time to learn about housing choices — renting vs. home ownership — and the responsibilities of each.

One advantage that young adults have on their side is time, but other factors work against them.

“There are fewer pensions today, and Social Security might be much different for future generations,” Gold noted.