Combining Tech and Personal Experience to Educate Children in Financial Literacy

Below is an article on the importance of financial literacy written by eMoney CEO, Ed O’Brien. This article was originally published on Forbes.com.

In 2004, the United States Senate designated April as Financial Literacy month. Since then, nationwide buy-in has increased and the number of organizations observing Financial Literacy month has grown.

While it’s nice to set aside time to ramp up financial literacy efforts, this is an ongoing issue in our country which spans the gamut of ages from adults nearing or in retirement all the way down to our children. Beyond focusing on a month of events and articles, here are some thoughts on what we can do to improve financial literacy all year-round.

Why financial literacy is important

The lack of financial literacy among many Americans is reflected across all demographics in our society. Furthermore, a recent study conducted by FINRA estimates that nearly two-thirds of Americans can’t pass a basic financial literacy test.

Far too many older Americans are ill-prepared for retirement. Many nearing retirement have too little saved and are forced to either delay retirement or live a lifestyle below their expectations.

Financial stress among American workers has been cited as a major drain on productivity both mentally and physically. Stress-related illnesses contribute to the higher cost of providing health insurance for employees.

Credit card debt is also an ever-increasing problem for Americans of all ages. This debt can prevent us from accomplishing our other financial goals such as saving for retirement or our children’s education.

In addition, the cost of a college education continues to skyrocket, causing many new college grads to face the burden of huge student loan debt as they enter the workforce upon graduation. It can even delay young adults from buying a home, getting married or having children. But the good news is that there are many tools available that give young adults a head start on managing their money.

Learning anchored in tech

Our children are growing up with technology in all facets of their lives. They are used to technology as part of their curriculum in school, so using it to teach them about money only makes sense. As you might guess, there is a growing universe of money apps designed for children. A recent article by Nerd Wallet highlighted a few:

  • Bankaroo is designed for kids aged 5-14 and allows them to track not only their savings, but also what their parents owe them in allowance.
  • Yuby, offered by Union Bank, is geared toward children ages 6-11 and includes key features such as the ability to track money kids are owed from doing chores and manage a to-do list of upcoming chores.
  • iAllowance is another app geared towards helping kids track their allowance. The app offers several unique features including push alerts from parents to remind their kids of upcoming chores, the ability to set up automatic allowance payments, other rewards for their kids when they meet certain goals and an unlimited number of “piggy banks” for each child.

Finance-related technology is gaining popularity in schools too. The National Endowment for Financial Education (NEFE) encourages the use of technology to teach money skills to older children as well. The organization highlighted the benefits of doing so in a recent article. Here are a few of my favorite quotes from teachers who were interviewed for the piece:

  • “I have watched the gang discussions in class change to stock market talk, and each morning, the students are eager to log on and check their portfolios.”
  • “They sincerely appreciate the opportunity to make virtual mistakes and avoid some of the same things in the real world.”
  • “Students create a unique picture of what their lives will be like in the future.”

NEFE makes the point that when properly implemented by engaged teachers, these technology tools can make an immense impact on children.

Financial advisors can play a role here as well. We recently profiled the work of Florida financial advisor David Hill, a member of eMoney’s advisory board. His firm works with the children and grandchildren of its clients at no extra charge. He indicated that this younger generation of investors is always impressed with the technology used throughout the financial planning experience and receptive to his guidance.

Learning from family

Many life lessons are passed down from one generation to the next through family. Healthy financial habits can be too. Parents can certainly set a path for their children to become financially literate adults.

I actually learned most of what I know about personal finance from my wife, Joanne, who I met in college. I was a computer science major. She was a finance major, and we married shortly after graduation. From the start, she made it clear that we would never use a credit card for something we could not pay cash for that day. Twenty-nine years later, we are trying to pass the same logic to our three boys who range in age from 17 to 23.

From an early age your kids will understand the concept of buying things with cash or a credit card. But what they might not understand is where that money comes from, and that it’s not a magical, endless source; it’s earned. Help them understand that earning money is difficult and requires hard work. Money doesn’t grow on trees, as the timeless saying goes, and understanding the value of a dollar is a lesson that transcends generations. Sure, how you might teach that lesson will likely be very different than how you learned it yourself. But that’s okay.

With summer vacation from school just around the corner, consider taking this time to teach some money lessons with your kids. Whether it’s offering an old-school allowance through a new-school app or letting them tag along to a visit with your financial advisor, the foundation you lay for your kids in financial literacy could influence their financial habits well into adulthood.

Ed O'Brien

Written By

CEO, eMoney Advisor