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MONEY AS YOU GROW 20 Things Kids Need to Know to Live Financially Smart Lives Presented by Beth Kobliner

President’s Advisory Council on Financial Capability

Youth Subcommittee: Amy Rosen (Chair), Ted Beck, John Bryant, Samuel Jackson, Beth Kobliner, John Rogers (ex-officio), Sherry Salway Black, Carrie Schwab-Pomerantz

To see the full presentation, go to moneyasyougrow.org 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

17 You should use a card only if you can 13 PAY OFF THE MONEY OWED IN FULL It’s important to KNOW each month. WHAT A COLLEGE WILL COST you before 18 choosing it. You need HEALTH 14 INSURANCE. 9 You should AVOID You should SAVE AT 19 USING CREDIT LEAST A DIME for every CARDS to buy things Putting all your eggs dollar you receive. you can’t afford to in one basket can be a risky way to invest; 10 pay for with . consider a DIVERSE Entering a credit card 15 MIX OF , number online is risky 5 BONDS, AND CASH. because someone Your fi rst paycheck You need to MAKE could STEAL YOUR may seem smaller 20 than expected since CHOICES about how INFORMATION. Always consider to spend your money. MONEY IS TAKEN OUT FOR . two factors before 11 investing: 6 THE RISKS The earlier you start to 16 AND THE ANNUAL It’s good to shop around save, the faster you’ll EXPENSES. A great place to 1 and COMPARE benefi t from compound before you buy. , which means SAVE AND INVEST YOU NEED MONEY YOUR MONEY EARNS MONEY you earn is to buy things. 7 INTEREST on your in a Roth IRA. interest. 2 It can be costly and DANGEROUS You earn money by TO 12 WORKING. INFORMATION online. A CREDIT CARD IS A TYPE OF ; if you 3 8 don’t pay your bill in You may have to Putting your money in full every month, you’ll WAIT BEFORE YOU a account will be charged interest and CAN BUY something PROTECT it and pay owe more than you you want. you interest. originally spent.

4 There’s a difference between THINGS YOU WANT and things you need.

BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY

3-5 YRS 6-10 YRS 11-13 YRS 14-18 YRS 18+ YRS 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

17 You should use a credit card only if you can 13 PAY OFF THE MONEY OWED IN FULL It’s important to KNOW each month. WHAT A COLLEGE WILL COST you before 18 choosing it. You need HEALTH 14 INSURANCE. 9 You should AVOID You should SAVE AT 19 USING CREDIT LEAST A DIME for every CARDS to buy things Putting all your eggs dollar you receive. you can’t afford to in one basket can be a risky way to invest; 10 pay for with cash. consider a DIVERSE Entering a credit card 15 MIX OF STOCKS, number online is risky 5 BONDS, AND CASH. because someone Your fi rst paycheck You need to MAKE could STEAL YOUR may seem smaller 20 than expected since CHOICES about how INFORMATION. Always consider to spend your money. MONEY IS TAKEN OUT FOR TAXES. two factors before 11 investing: 6 THE RISKS The earlier you start to 16 AND THE ANNUAL It’s good to shop around save, the faster you’ll EXPENSES. A great place to 1 and COMPARE PRICES benefi t from compound before you buy. interest, which means SAVE AND INVEST YOU NEED MONEY YOUR MONEY EARNS MONEY you earn is to buy things. 7 INTEREST on your in a Roth IRA. interest. 2 It can be costly and DANGEROUS You earn money by TO SHARE 12 WORKING. INFORMATION online. A CREDIT CARD IS A TYPE OF LOAN; if you 3 8 don’t pay your bill in You may have to Putting your money in full every month, you’ll WAIT BEFORE YOU a will be charged interest and CAN BUY something PROTECT it and pay owe more than you you want. you interest. originally spent.

4 There’s a difference between THINGS YOU WANT and things you need.

BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY

3-5 YRS 6-10 YRS 11-13 YRS 14-18 YRS 18+ YRS 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

3-5 6-10 11-13 14-18 18+ YRS YRS YRS YRS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

1 2 3 4 YOU NEED MONEY You earn money You may have to There’s a difference to buy things. by WORKING. WAIT BEFORE between THINGS YOU CAN BUY YOU WANT and ACTIVITIES ACTIVITIES something you things you need. want. ACTIVITIES

ACTIVITIES

6-10 11-13 14-18 18+ MILESTONES FOR 3-5 YEAR OLDS YRS YRS YRS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

ACTIVITIES TO HELP YOUR KIDS REACH THIS MILESTONE 3 4 3 You earn money You may have to When your child is standing in line for a turn There’s a Youdifference may have to by WORKING. WAIT BEFORE on the swings, or looking forward to her favorite between THINGSWAIT BEFORE YOU CAN BUY holiday, point out that sometimes we have to YOU WANTYOU and CAN BUY ACTIVITIES something you wait for things we want. things yousomething need. you want. want. Find three jars (or cans) and label one for ACTIVITIES ACTIVITIES , one for spending, and one for sharing.

Suggest that your child put some of the money she gets into the saving jar, so she can buy a toy or treat when she has saved enough.

6-10 11-13 14-18 18+ MILESTONES FOR 3-5 YEAR OLDS YRS YRS YRS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

5 6 7 8 You need to MAKE It’s good to shop It can be costly Putting your CHOICES about around and and DANGEROUS money in a savings how to spend your COMPARE PRICES TO SHARE account will money. before you buy. INFORMATION PROTECT it and online. pay you interest. ACTIVITIES ACTIVITIES

ACTIVITIES ACTIVITIES

3-5 11-13 14-18 18+ YRS MILESTONES FOR 6-10 YEAR OLDS YRS YRS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

ACTIVITIES TO HELP YOUR KIDS REACH THIS MILESTONE 8 Putting Ityour can be costly Putting your Visit a nearby federally insured or with your child. money inand a savingsDANGEROUS money in a savings accountTO will SHARE account will Ask about the interest rates on PROTECTINFORMATION it and PROTECT it and a savings account. pay youonline. interest. pay you interest. Discuss with your child how money in savings ACTIVITIES ACTIVITIES accounts is protected by federal insurance. If the bank goes out of , she will get her money back.

Open a savings account for your child.

3-5 11-13 14-18 18+ YRS MILESTONES FOR 6-10 YEAR OLDS YRS YRS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

9 10 11 12 You should SAVE Entering a credit The earlier you A CREDIT CARD IS AT LEAST A DIME card number start to save, A TYPE OF LOAN; for every dollar online is risky the faster you’ll if you don’t pay you receive. because someone benefit from your bill in full could STEAL YOUR compound interest, every month, you’ll ACTIVITIES INFORMATION. which means YOUR be charged interest MONEY EARNS and owe more ACTIVITIES INTEREST on your than you originally ACTIVITIES interest. spent.

ACTIVITIES ACTIVITIES

3-5 6-10 14-18 18+ YRS YRS MILESTONES FOR 11-13 YEAR OLDS YRS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

ACTIVITIES TO HELP YOUR KIDS REACH THIS MILESTONE 11 12 11 Entering a credit The earlier you Show your child the following: If he sets aside A CREDITThe CARD earlier IS you card or Social start to save, $100 every year starting at age 14, he’d have about A TYPE startOF LOAN to save,; Security number the faster you’ll $23,000 at age 65. However, if he begins saving at if you don’tthe fasterpay your you’ll age 35 he’d have about $7,000 at age 65. Assume online puts you at benefit from bill in fullbenefit every from the account earns 5% every year. risk for someone compound interest, month, compoundyou’ll be interest, STEALING YOUR which means YOUR To compute compound interest, use chargedwhich interest means YOUR INFORMATION. MONEY EARNS the calculators at .gov. and oweMONEY more EARNS INTEREST on your than youINTEREST originally on your ACTIVITIES interest. Discuss how much your child can save. spent. interest. What will he have to give up? Is it worth it? ACTIVITIES ACTIVITIES

3-5 6-10 14-18 18+ YRS YRS MILESTONES FOR 11-13 YEAR OLDS YRS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

13 14 15 16 It’s important to You should Your first paycheck A great place to know WHAT A AVOID USING may seem smaller SAVE AND INVEST COLLEGE WILL CREDIT CARDS than expected since MONEY you earn is COST you before to buy things you MONEY IS TAKEN in a Roth IRA. choosing it. can’t afford to pay OUT FOR TAXES. ACTIVITIES for with cash. ACTIVITIES ACTIVITIES

ACTIVITIES

3-5 6-10 11-13 18+ YRS YRS YRS MILESTONES FOR 14-18 YEAR OLDS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

ACTIVITIES TO HELP YOUR KIDS REACH THIS MILESTONE

If your child has a , encourage him to open a Roth IRA (Individual Retirement Account).

16 Explain that a Roth IRA allows the interest you earn to grow -free for life. A great Yourplace first to paycheck A great place to SAVE ANDmay INVEST seem smaller SAVE AND INVEST Experiment with different amounts of savings and MONEYthan you earnexpected is since MONEY you earn is interest rates. Use a compound interest calculator in a RothMONEY IRA. IS TAKEN in a Roth IRA. at investor.gov. OUT FOR TAXES. ACTIVITIES Use the “Rule of 72” to estimate how many years ACTIVITIES it would take to double your money. If you invest in an account that earns 8% interest, you’ll double your money in nine years (72 divided by 8 is 9).

Explain to your child that once he starts a job, he may be offered a similar account at work called a 401(k). Some employers even provide matching contributions.

3-5 6-10 11-13 18+ YRS YRS YRS MILESTONES FOR 14-18 YEAR OLDS YRS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

17 18 19 20 You should use a You need HEALTH Putting all your Always consider credit card only if INSURANCE. eggs in one basket two factors before you can PAY OFF can be a risky way investing: THE MONEY ACTIVITIES to invest; consider THE RISKS AND OWED IN FULL a DIVERSE MIX OF THE ANNUAL each month. STOCKS, BONDS, EXPENSES. AND CASH. ACTIVITIES ACTIVITIES

ACTIVITIES

3-5 6-10 11-13 14-18 YRS YRS YRS YRS MILESTONES FOR 18+ YEAR OLDS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY 20 THINGS KIDS NEED TO KNOW TO LIVE FINANCIALLY SMART LIVES

ACTIVITIES TO HELP YOUR KIDS REACH THIS MILESTONE

Invest in an IRA or a 401(k) as soon as you 19 have some income. 20 19 You need HEALTH Putting all your Always Puttingconsider all your Understand that have different levels INSURANCE. eggs in one basket of risk; learn the advantages and disadvantages two factorseggs before in one basket can be a risky way of products, such as stocks, bonds, and investing:can be a risky way ACTIVITIES to invest; consider mutual funds. THE RISKSto invest; AND consider a DIVERSE MIX OF THE ANNUALa DIVERSE MIX OF STOCKS, BONDS, Ask for the “annual expense ratio,” and compare EXPENSESSTOCKS,. BONDS, AND CASH. it to that of other mutual funds before you invest. AND CASH. ACTIVITIES ACTIVITIES Understand any commissions or fees you’ll pay to a broker if you’re buying stocks and bonds.

Ask about funds, which tend to have low annual fees.

3-5 6-10 11-13 14-18 YRS YRS YRS YRS MILESTONES FOR 18+ YEAR OLDS

ABOUT RESOURCES POSTER BETH KOBLINER, PRESIDENT’S ADVISORY COUNCIL ON FINANCIAL CAPABILITY The following resources were reviewed in the process:

Standards and curricula • Holden, Karen. (2009). Financial Literacy Programs Targeted on Pre-School Children: Development and Evaluation. La Follette School • Council of Chief State School Officers and the Working Paper No. 2009-009. National Governors Association’s Common Core State Standards for Mathematics • Lusardi, Annamaria. (2007). The Importance of Financial Literacy: Evidence and Implications for Financial Education Programs. • Council for Economic Education’s Financial Fitness for Life Policy brief. • Jump$tart Coalition’s National Standards • Mandell, Lewis. (2009). Two Cheers for School-Based Financial Education. Issue brief: The Aspen Institute Initiative • Junior Achievement’s $ave USA on Financial Security. • National Endowment for Financial Education’s • Moffitt, Terrie E., et al. (2011). A Gradient of Childhood Self-control High School Financial Planning Program Predicts Health, , and Public Safety. Proceedings of the National • Network for Teaching ’s Your Financial Future Academy of Sciences of the United States of America (PNAS). • Schwab’s MoneyWise • Madrian, Brigitte C., and Dennis F. Shea. (2001). The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior. • Sesame Workshop’s For Me, for You, for Later: The Quarterly Journal of . First Steps to Spending, Sharing, and Saving • Norton, Michael, and Leonard Lee. (2007). The “Fees > Savings” Link, • Treasury and Financial Literacy and Education Commission’s or Purchasing Fifty Pounds of Pasta. Harvard Business School Financial Education Core Competencies Marketing Research Paper No. 08-029. • Treasury’s Money Math: Lessons for Life • Pleskac, Timothy J., et al. (2010). A Detection Model of College Withdrawal. Organizational Behavior and Decision Process. • Wisconsin’s Model Academic Standards for Personal Financial Literacy • Prelec, Drazen, and Duncan Simester. (2000). Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay. Marketing Letters, 12:1, 5-12. Academic papers • Sherraden, M.S. (2007). From Financial Literacy to Financial • Ashraf, Nava, Dean S. Karlan, and Wesley Yin. (2004). SEED: Capability Among Youth. Journal of Sociology and Social Welfare A Commitment Savings Product in the Philippines. (Policy Paper). 34(3), 119-145. • Dhar, Ravi, Joel Huber, and Uzma Khan. (2005). The Shopping • Shim, Soyeon, et al. (2009). Financial Socialization of First-year College Momentum Effect. Journal of Marketing Research. Students: The Roles of Parents, Work, and Education. Journal of Youth and Adolescence, 39(12), 1457-1470. • Dupas, Pascaline, and Jonathan Robinson. (2011). Why Don’t the Poor Save More? Evidence from Health Savings Experiments. • Shim, Soyeon, and Joyce Serido. (2011). Young Adults’ Financial The National Bureau of Economic Research. Capability: APLUS Arizona Pathways to Life Success for University Students Wave 2. Take Charge America Institute for Consumer • Education Pays. Bureau of Labor Statistics, 2011. Financial Education and Research. • Hershfield, Hal E., et al. (2011). Increasing Saving Behavior • Staten, Michael. (2007). Academic Success and Well-Being of College Through Age-Progressed Renderings of the Future Self. Students: Financial Behaviors Matter. Take Charge America Institute Journal of Marketing Research. for Consumer Financial Education and Research. • Hira, Tahira K. (2010). Childhood Consumer Experience and the • Tisdell, Elizabeth J., Edward W. Taylor, and Karin Sprow. (2010). Financial Literacy of College Students in Malaysia. Family & Consumer Financial Literacy Education for Adult Learners in Community-Based Sciences Research Journal, 38, 4, 455-467. Programs: Report on the Mixed Method Study of Financial Educators. The National Endowment for Financial Education (NEFE). • Hogarth, Jeanne M. (2003). Financial Management: The Connection between Knowledge and Behavior. • Ulkumen, Gulden, and Amar Cheema. (2011). Framing Goals to Bulletin July 2003, 309-322. Influence Personal Savings: The Role of Specificity and Construal Level. Journal of Marketing Research. With gratitude to the following experts for sharing their time and insights:

President’s Advisory Council on • Karen C. Holden, University of Wisconsin-Madison Financial Capability: Youth Subcommittee • Chuck Kalish, University of Wisconsin-Madison • John Rogers, Chair, President’s Advisory Council on Financial Capability, and Chairman, CEO, and Chief • Punam Anand Keller, Tuck School of Business at Investment Officer of Ariel Investments Dartmouth • Amy Rosen, Vice Chair, President’s Advisory Council • Claudia Kerbel, University of Rhode Island on Financial Capability, Chair, Youth Subcommittee, • Harold Kobliner and President and CEO of the Network for Teaching Entrepreneurship • Shirley Kobliner • Ted Beck, President and CEO of the National • Laura Levine, Jump$tart Coalition Endowment for Financial Education • Annamaria Lusardi, George Washington University • John Bryant, Founder, Chairman, and CEO of School of Business Operation HOPE • Lewis Mandell, The Aspen Institute • Samuel Jackson, Founder, Chairman, and CEO of the • Kristen McDaniel, Wisconsin Department of Public Economic Empowerment Initiative, Inc. Instruction • Sherry Salway Black, Director of the Partnership for • Nan J. Morrison, Council for Economic Education Tribal Governance at the National Congress of American Indians • Luke Rhine, Maryland State Department of Education • Carrie Schwab-Pomerantz, President of the Charles • Mary Rosenkrans, Pennsylvania Office of Financial Schwab Foundation Education • Patricia Seaman, National Endowment for Financial Other experts Education • Brenda Barr, Colorado Department of Education • Margaret Sherrard Sherraden, Center for Social Development at Washington University in St. Louis • J. Michael Collins, University of Wisconsin Madison • Robert I. Solomon, Ariel Investments • Adrian Franco, Columbia University • Martha Staten • Mary Hagerty, Operation HOPE • Michael E. Staten, Take Charge America Institute at • Julie Heath, University of Memphis the University of Arizona • Jim Hedemark, Rhode Island Jump$tart Coalition • Jennifer Thibeaux, Operation HOPE • Billy J. Hensley, National Endowment for Financial • Richard M. Todd, Federal Reserve Bank of Minneapolis Education • Lois A. Vitt, Institute for Socio-Financial Studies • Tahira K. Hira, Iowa State University • William B. Walstad, University of Nebraska-Lincoln • Jeanne M. Hogarth, Board of Governors of the Federal Reserve System