smart spending

Make financial literacy a lifelong quest

John FarrellToday's children are growing up in a world where financial matters have become increasingly complex. As financial services evolve and tax laws change, financial literacy is more important than ever before.

Both educators and parents should play a key role in teaching children about money, says John Farrell, assistant dean at Rider University in Princeton, N.J., and director of the school's Center for the Development of Leadership Skills. He says the learning process must be viewed as a "lifetime quest."

How important is it to educate students about money management?

Financial literacy is a lifetime quest. Money management is a set of life skills that needs to be taught throughout our lives, from (ages) 5 to 105. Where, how and from whom may change, but we need to keep learning about financial management concepts and solutions as our personal and financial lives change.

Over the last several years, financial services and the tax laws have become more complex. To be in a good position to handle these complexities, we must have an ongoing financial education that is independent from those who have a financial interest in our decisions -- that is, providers of financial services like insurance companies and sellers of investment products.

K-12 schools and universities are in a unique position to teach us the foundation concepts upon which we can build our financial literacy. Teachers and professors can provide their students with the fundamental financial topics, such as banking services, insurance, time value of money and investing for the future.

More importantly, they can shape their students' thinking to understand the factors that impact financial matters and teach them how to ask the right questions, especially (of) those who are ... selling us financial solutions.

As educators, we also know that in-class learning can only take our financial education so far; learning by doing is a key element of anyone's financial education. This is where parents come in as teachers, coaches and role models -- hopefully not bad examples.

Do you believe it is a responsibility of the parents to teach their kids about finances?

Absolutely! Parents actually have the primary responsibility for teaching these skills. What better place to teach about money than in the "economic unit" of a family. I believe parents are in the best position to educate their children.

Unfortunately, they are not often well-equipped to do so. In fact, most parents don't often sit down with their children and have those needed conversations about money or talk about the family's finances. They should start educating their children at a young age with teaching the fundamentals and purpose of money, and most importantly, how to value money.

Parents' lessons on money matters should be complementary to what is being taught in schools and vice versa. Still, the bottom line is that the biggest influences on a child's personal financial behavior are the ways in which their parents handle money matters and the financial education that parents provide.

At what age should schools start teaching about basic personal finance topics?

There is a natural progression of learning about personal finance starting in elementary school and continuing through high school and on to college.

For years, we have used money to help students learn mathematics and vice versa; after all, fundamental mathematics is key to money matters. I believe that it is incumbent on our K-12 schools, as the students begin to learn multiplication, to start addressing topics such as savings, interest and the value of money. This usually takes place between the third and fifth grades.

For the middle school years, many states, including New Jersey, have adopted new financial literacy standards that require the curriculum to cover a range of topics, including setting goals, budgeting, basic business concepts, taxes and money management. In the high school years, these topics should be reinforced and others introduced, such as economics, credit, insurance, investments and philanthropy.

By the time students leave high school, they should have a basic understanding of the personal financial management concepts. Of course, these lessons will be complemented and reinforced by their personal experiences in their part-time jobs, saving for big financial goals and the personal financial management activities of their families.

Should it become a requirement to pass a financial literacy class to graduate?

Financial literacy is a set of life skills that needs to be taught in school like other life skills and academic topics. I applaud those departments of education, school districts and not-for-profit organizations, such as Junior Achievement, for setting academic standards, developing curriculums and delivering education to drive financial literacy throughout the K-12 experience.

As an educator, I am more concerned with the students understanding personal financial matters through interactions with parents, teachers and professionals in the field, in a practical, hands-on manner. Still, I believe that money management should be a requirement for graduation.

We would like to thank John Farrell, assistant dean at Rider University in Princeton, N.J., and director of the school's Center for the Development of Leadership Skills, for his insight.

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