How Can We Boost Teens' Financial Literacy?

Dear Readers,

For the last 20-plus years, April has been designated as Financial Literacy Month—and for good reason! As is the case every year, I welcome the opportunity not only to acknowledge the progress we've made as a country, but also to shine a bright light on our continuing and urgent need to do even more.

A recent report from the Council for Economic Education (CEE) provides an in-depth analysis of the slow but steady improvement in offering personal finance education in our schools. But as parents and concerned citizens, it’s important to understand that we can’t just hand over the job to our kids’ schools. We, too, can play an essential role in educating our children about money, hopefully before they assume complete responsibility for their financial futures.

Finding the best time to start

I’m often asked, “How early is too early to teach kids about financial literacy? or “What’s the best age to teach financial literacy?” That’s hard to answer definitively not only because every child is different (even in the same family!), but also because it’s almost never too soon to start to lay a foundation for future learning.

Children as young as age four or five begin to understand basic concepts of numbers. When they’re in elementary school, they become more comfortable with how numbers work and learn basic arithmetic. In middle school, they can then apply this knowledge to more abstract concepts like compound growth and diversification and start to develop skills in planning and decision making.

But lately, I’ve been thinking that the sweet spot for taking on financial literacy in a more substantial way is around the teen and high school years. Here’s why—and how you can help more kids get access to high quality financial education.

Getting to them while they’re getting going

I see the teen years as the prime time for several reasons. First, although some teens wean themselves from their parents’ finances faster than others, most have some money of their own, whether that’s from a part-time job, allowance, or gifts. And there’s nothing like having skin in the game to make their education more meaningful.

Second, by the time a child is in high school, they likely have the math skills to calculate and appreciate not only the positive power of compound growth but also the negative impact of paying fees and interest on credit card debt. Many teens will be able to grasp the tradeoff between risk and reward and apply that concept to building an investment portfolio. Others are born entrepreneurs and will be ready to start applying their skills to building a business.

The third reason isn’t skill-based, but more a reflection of their developmental stage. Teenagers are observers. And they’re vulnerable. Many are wired to experiment, push boundaries, and test limits. Others are super cautious and need to be encouraged to flex their risk muscles. Either way, they all have to learn how to deal with new situations and uncertainty in a productive way. Learning about money—from budgeting to saving to borrowing to investing—is all a part of the process of developing the skills they need to become an independent adult.

We're making strides, but need to do more

I’m excited that 23 states now require students to take a course in personal finance to graduate high school but that leaves too many that still don’t. And we need to do more to provide training and resources for more teachers.

This is especially true for teens who live in under-resourced communities. Schools in wealthy communities are much more likely to teach financial literacy. That’s just a fact. But kids from low- and moderate-income families need a solid financial education just as much, if not more. All kids deserve access to high-quality financial education to build a future of financial security and opportunity.

That's why I've been proud to partner with organizations such as CEE, Donor's Choose, Boys & Girls Club of America, Next Gen Personal Finance, Operation HOPE and Girl Scouts of America who offer great programs in financial literacy to help level the playing field. And with the introduction of Moneywise America,  Schwab pledges to make financial literacy available to high schools and neighborhoods across America. As a company, we see it as our mission to help prepare every teen in America to achieve financial freedom by filling the education gap too many schools and communities struggle to address.

The right way to reach teens

You don’t have to be a financial expert to help educate your kids. Here are a few things to keep in mind:

• Don’t lecture. Instead, use stories and share your experiences. As much as you think appropriate, share your family’s situation, including your budget, savings, insurance and investments. Take money out of the closet.
• Encourage your teen’s questions. Nothing should be off the table.
• Walk the talk. Kids watch what you say and do. Often the unspoken messages are the most powerful of all.
• Make concepts and examples relevant to their lives. Having a savings or investing account, an allowance, or making them an authorized user on a credit card all are ways to help your teen learn by doing.
• Be careful with implicit and explicit biases when talking to girls. Help your daughter become as strong as any of her male counterparts by giving her the same skills and knowledge to succeed.
• Discuss your values. So much of money management has to do with our personal priorities, so show your teen how they can connect the two. Fancy car or college fund? Expensive vacation or helping an aging parent? Include your teen in these important decisions.
• Don’t be afraid to say ‘I don’t know.’ Seek out the answer together!

Other ways you can help

In addition to educating your own children, there are many outstanding organizations that can let you become involved and advocate for financial literacy in your own community:

• https://www.councilforeconed.org/policy-and-advocacy/toolkit/
• https://checkyourschool.org/
• https://gflec.org/education/fast-lane/

I’ve been advocating for financial literacy for most of my career for the simple reason that I see it as one of the most powerful ways to build a more equitable world. Please join me in honoring Financial Literacy Month by helping to educate the children in your home and in your community. Our collective future will be better for it.

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.