Wednesday, April 10, 2013

Building financial literacy and nurturing confidence in children

Children need to learn basic economic concepts early. One might think this is only to help them keep track of their finances. However, it is a much bigger issue than that. Girls, in particular, need to learn to negotiate and value their own worth. Dr. Linda Babcock, an economist at Carnegie-Mellon University notes, “I tell my graduate students that by not negotiating their job at the beginning of their career, they're leaving anywhere between $1 million and $1.5 million on the table in lost earnings over their lifetime.”[1] In fact, that loss is in the salary alone. Factor in what is lost in benefits which are based on salary, quite often, one loses even more.

The more we integrate vocabulary related to financial literacy into our everyday conversations, the more comfortable our children will feel with the concepts.  The more we discuss everyday financial experiences, the more successful they will be with handling their own finances.

Don’t wait until your children are older to begin to help them develop the language and skills that will make them competent, confident, and effective managers of their financial lives. 

Look for opportunities to use the word trade-off. When we make choices, we are accepting a trade-off.
·        Choose to go to the park instead of a movie
·        Choose one item at the store instead of another
·        Choose to read a book rather than watch television
·        Choose peas over carrots

Another way to look at trade-offs is to consider equivalents.
What is the equivalent value of:
·        A year of tuition?
·        Riding lessons?
·        Money spent at Target in a week or month?
·        Money for a week-end of "fun"- itemize what was spent.

Sit down with your children and go over the grocery receipts.  Which items are wants? Needs?  If your children are older, let them see the utility bills. Talk about what happens when the lights are left on and water is left running. All of these affect the bills. When money is spent on bills, the trade-off is less money for wants.

Look at the collection of Halloween candy amassed by trick-or-treaters. Talk about setting a limit on the number of pieces to be eaten in a day.  This is a budgeting basic.  If one does not consume all at the moment but saves some for later, what one has saved will last over a longer period of time.
ACTIVITY: Decorate four jars of equal size. Make a coin size hole in the top of each. Then put four different labels on the jars: spend, save, donate, and invest. This will help your child see different ways to budget money. You can talk about your family values with relation to these categories, too.

Talk about chores. Do you expect chores to be done? How does this contribute to the household? How does this put a value on how one uses time?  How does this tie in with trade-offs and decision-making?

If your child wants money to donate to a charity, consider having her earn it by performing chores for a neighbor or relative.  Discuss the value of earning money instead of simply handing it over.  This might be a good opportunity to talk about groups who stand on street corners in "bucket brigades" to collect for a group.  Could your child find a way to raise money that puts value back into the community- a car wash, raking leaves, babysitting and giving that money to the desired group as opposed to keeping it? Talk about the value of one's time when babysitting or raking leaves in the neighborhood.  What are your skills and time worth?  If your child simply says, I'll take whatever they give me, how might this translate into a willingness to ask for a fair salary later in life?  This might be a great time to talk about negotiation, a life skill.

The bottom line is that financial literacy opportunities are all around us. With a bit of time and thought, we can help our children build skills and confidence that will last a lifetime.

Some helpful links:
PROGRESS- Program for Research and Outreach on Gender Equity in Society – offers some great, simple tips for teaching negotiating skills to girls and women 

[1] Ludden, Jennifer. National Public Radio, "Ask For a Raise, Most Women Hesitate." Last modified 2011. Accessed April 9, 2013.

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