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Marketplace Features
For cassette copies of our special series, "The Gelt Trip,"
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any Marketplace program, please call: 303-823-8000.
Stories in the series:
Kids and Money
Reality Checking
Not Your Mother's Budget
Financial Planning
High-Tech Money Management
Kids and Money
Michelle Brier
Host: As adults, we work, earn money, budget, spend and save -- these are the elements that account for personal finance. We all know our fiscal habits may lead to wealth or to ruin. But what we don't know, is how exactly these habits are formed and if they can be taught to young children. A growing number of educators think they can. They say financial literacy for kids is as important as learning the a-b-c's. Lots of families agree. Marketplace's Michelle Brier begins our month-long series.
Ah, the lemonade stand. Piles of paper cups and brimming pitchers. Hand-lettered signs held up by eager boys and girls, like these kids in New Jersey, hoping to catch a customer's eye.
Kids: We should make a drive through lemonade stand, so like you put it on the corner and the cars drive by and if they want some lemonade, you just give them a cup.
For generations, enterprising youngsters have competed for prime real estate ... busy street corners where they can sell their drinks and earn some cash.
It usually amounts to pocket change -- enough for an ice cream or a trip to the local arcade. But more and more, educators say it's precisely at the impressionable age of five or six that there's an opportunity to teach kids the earning, spending and saving habits theyill use as adults. Lew Mandel is dean of the School of Management at the Sate University of New York, Buffalo
Mandel: We sort of believe we should be teaching kids good table manners when they're very young even though kids prefer to just stuff food in their face with their hands. We try to teach them to look out for cars crossing the street. And personal finance is something that as adults we do every single day. It's really part of the way we function.
Mandel says kids who manage money early avoid debt later. It's a critical tool, he says, in fighting the rising tide of personal bankruptcy, the most obvious sign of poor money management by individuals.
Last year, 135,000,000 people filed for personal bankruptcy, according to one study. That's a jump of 20 percent from 1996. What's even more alarming, experts say, is that nearly nine percent of those who filed in 1997 were younger than 25.
Numbers like that might be a red flag that something's very wrong with the financial health of the younger generation. Some say the only solution is to teach kids the basics of personal finance even before theyive aced the alphabet. Irene Leech is a professor of consumer education at Virginia Tech University.
Leech: That's when the teachable moment is. And so, as they're first coming to interact in the marketplace is the ideal time to teach things so that they start learning right from the beginning versus going back and having to unlearn them.
But can children master concepts like budgeting and saving -- concepts that seem to confound so many adults? Experts say hands-on lessons learned by selling drinks on a corner, or running a yard sale, stick the best.
The furniture retailer Ikea and financial house Merrill Lynch agree this model works. They've teamed up to offer one-day workshops for kids on running a lemonade stand. The idea: to give youngsters a chance to learn how to be an entrepreneur.
Christine Cook, manager of educational services for Merrill Lynch, says there are ways to introduce children to basic financial prinicples.
Cook: Kids are natural collectors, and they'll collect seashells, they'll collect coins and once you get them collecting coins, you start talking about denominations, well this copper looking thing is called a penny, and what is a penny, it's one cent. And then you start making the connection and nickels, how many pennies to a nickel. From there you can say, well, four quarters is a dollar, what can a dollar buy?
Educators agree: hands-on fiscal lessons seem to work.
Mandel: It's probably something that has to be learned painfully. But probably better off learning it painfully when youire six years old and can't join yor friends for an ice cream on Friday if youive already spent your allowance than when youire 27 years old and have somebody come and repossess you car.
Still, classroom learning has its value. The Jumpstart Coalition, a nonprofit that promotes financial literacy among kids, says some states are already seeing to it that students are on the road to financial literacy. So far, five states have mandated courses in personal finance as a requirement for high school graduation. Several other states offer their students similar programs, though they are not required. Educators say states that don't teach money management to kids have higher rates of personal bankruptcy.
In some cases, parents may think their kids are learning the lessons too well. Listen to this story from Eric Yaberbaum. He says his six-year old daughter Cole wants to know everyting about taxes and money, and has already started applying what she knows.
Yaberbaum: Two weeks ago I didn't have any cash to pay for dinner to pay for pizza and I asked if I could borrow 20 dollars and she looked at me and said, okay, but will I get any interest back?
Cole's savoir-fair isn't unique, and it raises the question, as we teach our children about money, what values are we conveying with the lessons? Irene Leech says with the basic concept of savings and spending, kids also learn responsibility.
Leech: A lot of kids are in families where their parents are working and a lot of research has shown that kids are doing the grocery shopping in the family. And so they may have an account that they're operating from, they may has a debit card that they use or whatever.
Children themselves say don't underestimate their grasp of the importance of money. Nine-year-old Zoe Kessler put her savings savvy to good use in a real emergency.
Kessler: Like 5 months ago, um my family got um held up and they took my brother's money and they didn't know that I had money, so since I had a lot of money, they used my money to go get breakfast when it was over.
While that may be an extreme example, there is plenty of evidence that teaching your children about personal finance, giving them allowances, and letting them experiment with savings and spending could ulitmately help them on the road to lifelong fiscal health and independence.
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| Our series was reported by: Scott Horsley, Kristian Foden-Vencil, Amy Eddings, Jessica Smith and Michelle Brier; edited by Eve Epstein and Michelle Brier; engineered by Neil Rauch; with production assistance from Sara Ivry, Ben Donovan and Julie Hantman. |
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