What Children Should Learn About Personal Finance in School
There are many monetary basics that children should be aware of even before they get to high school, where typically they experience their first real world personal finance experiences of getting a first job and/or buying a car . The Consumer Financial Protection Bureau (CFPB) recently released some guidelines for what educators should be teaching children about personal finance at different grade levels.
The CFPB recommends that children start learning about finance in elementary school. While many currently learn about savings at that age thanks to good old piggy banks, the CFPB also thinks that kids should know about investing. This includes knowing the difference between saving and investing as well as understanding the concept of compound interest. On the opposite end of the financial spectrum they also recommend teaching children about borrowing and credit, touching on interest rates and insurance as well.
In middle school the CFPB says it’s time for kids to look more in depth at investing. This includes looking at how to calculate interest and how those rates along with inflation can affect savings. Different types of investments such as stocks, bonds, mutual funds, and real estate should also be discussed in the classroom.
Middle school is also when children should learn about things like credit scores, insurance premiums, and how credit cards charge interest. One example the CFPB offers is discussing the benefits of financing long-term purchases compared to making daily purchases with credit. Another interesting teaching point is getting children to look beyond advertising when evaluating a purchase.
Finally high school is when students prepare to become financially responsible adults. For this they will need to learn about college tuition costs, the risks and benefits of entrepreneurship, how the tax code affects income, and how to calculate return on investments. Students should also learn about basic economics and government agencies like the SEC and FDIC.
Most importantly this is when students should be learning about borrowing and financial risk. They should know how student loans and other types of lending work and how to compare the cost of credit from different institutions. Lastly, topics such as health, auto and other types of insurance should be covered in addition to learning about identity theft and how to prevent it.
While all these topics are important for children, teens, and young adults to know about, few schools are covering personal finance issues in detail. That’s why it’s necessary for parents to get involved and start teaching their children about financial literacy. By following the CFPB’s guidelines for educating children on monetary issues, we can help ensure that future generations make sound financial decisions.