A new financial literacy campaign was recently released by the White House that covers a financial education plan for children. The best part, it starts at home.
The new campaign, that was put together by the President’s Advisory Council on Financial Capability, is called, Money as You Grow. The new site offers guidance for parents and teachers that cover 20 financial lessons for kids, spread across five age groups.
The Advisory Council was originally introduced in 2010 to find ways to improve youth financial literacy. It took about a years worth of research, to create this new campaign, which was ten months too long. Much of what is recommended in the guide has been touted as necessary by the personal finance community for years. That said, there are many important topics covered that everyone should know and it does offer some general guidance on what to cover.
3 to 5 Year Olds
The early lessons can easily be covered through a child’s normal curiosity. The first four lessons include: what coins and money are, what a job is, and to set up a savings jar or piggy bank.
I’m not sure how important it is to cover at this age. It might even be on the ambitious side. Most of these topics will come up at some point by grade school.
6 to 10 Year Olds
The next four lessons get into paying for things, coupons and price comparison. It’s also a perfect time to open a savings account and discuss the basics about banks. It even suggests covering the FDIC and NCUA.
A savings account should be started the earlier the better. It will help reinforce a save first mentality. The whole concept of shopping around for the best price and just letting kids pay for things and getting change back, are all great ideas.
11 to 13 Year Olds
Lessons 9 through 12 cover setting savings goals, online protection, compound interest and credit card basics.
The suggested 10% savings goal is a good start. I’d recommend 20%. Online protection just makes sense with any introduction to the internet and would probably be covered earlier. Then there is the credit card discussion. Maybe I’m wrong, but it’s a bit early for a 12-year-old to deal with a credit card. I can understand a lesson on borrowing money and having to repay it, but credit card basics might be better at the high school level.
14 to 18 Year Olds
The high school years, combined with the 18 and over topics could easily be turned into a semester or full year required course. Some of the information can be taught at home like: college tuition, expenses, budgeting and automatic savings. But it also covers some of the more misunderstood areas like: taxes, gross and net pay, Roth IRAs, student loans, and 401k’s.
18+ Year Olds
The last four lessons cover credit reports, health insurance and emergency funds. It finally gets into a few basic investing topics with diversification, comparing mutual fund expense ratios, and index funds.
All of these topics could be included in a high school level course. The addition of health insurance is important but I’d bet is more politically driven since it fails to mention other types of insurance.
So, Whats Missing?
For a first draft, the financial literacy campaign is a good start to offering discussion points for parents and teachers but it’s missing a few key areas. There is no mention of learning how financial markets work, basics about stocks, bonds, loans, and even social security. You’d think that the mortgage driven financial crisis would at least call for a mortgage lesson.
While I believe that most of these topics can be covered at home, let’s be realistic too. What happens if the parents don’t understand it themselves? Having some personal finance course at the middle school or high school level would alleviate this problem. At the very least, it would guarantee high school graduates a certain level of financial literacy.