Teaching About Money

Money Management 101: Financial Basics All Students Should Know

Whether your child is putting on a cap and gown for a high school graduation ceremony or for a kindergarten commencement exercise, the Texas Society of Certified Public Accountants says there are some money management basics students of all ages should know before they receive their diplomas.

Start out young
Toddlers and very young children can understand basic financial concepts like money recognition, spending, and saving. Parents can show their children various coins and explain the value of each currency. 

Toddlers can begin learning to save by regularly setting aside money in a piggy bank. Even a game of pretend grocery shopping can help small children understand that it takes money to purchase goods and services.

Moving on to more complex financial concepts 
Once children are in elementary school, parents can expose children to more complex financial concepts like budgeting, financial goal-setting, and borrowing money.

If financial circumstances permit, parents can provide their children with a weekly allowance. 
Receiving a weekly allowance will help children set financial goals, like saving up to buy a new toy, and give them the means to accomplish these goals.

This is also a good time to open a child’s first savings account. Many banks and credit unions offer child-friendly accounts with no minimum balance and low fees.

Elementary school children are the right age to begin a discussion of credit and ATM cards. Children see credit cards used regularly for transactions, and it’s important for them to understand how credit works and know that ATM cards withdraw cash directly from a checking or savings account. 

Teaching about investing 
Parents of middle school and junior high students can teach them basic investing concepts like compound interest. Consider giving your child a pre-paid credit card and explain to them how to use credit wisely.

This is an opportunity to explain how compound interest works for you when your money is invested properly and how it works against you when you are charged interest on your credit card balances each month.

Visit the AICPA site, 360 Degrees of Financial Literacy for more articles on teaching tweens and teens about money.

High school graduation is looming 
By the time students enter high school, they should understand how to earn, save, and spend money responsibly. Students can open a checking account and learn how to balance a checkbook. 

High school students also are capable of understanding more about long-term investing strategies and the stock market.

Parents should be sure that high school students, college-bound graduates in particular, understand the dangers of credit cards and know how to use credit cards responsibly.

Getting a first paycheck can be a puzzling experience for a student holding a part-time job. They are not accustomed to reading a paycheck and are often surprised about the amount of money withheld for taxes.

Parents can take the opportunity to review the paycheck with the student and explain how the taxes collected are used to build roads, provide police and fire department services, and fund other government programs and services. This also may be a good time to talk with students about filing a tax return for the first time.

(Updated 2015) Reviewed and edited by Jason Freeman, CPA, Meadows, Collier, Reed, Cousins, Crouch & Ungerman, L.L.P.