Lessons Often Missed When Teaching Children About Money
You help your kids open their first bank account and show them how to use money to buy things, but when was the last time you talked to them about economics? If the answer is never, you are leaving a lot unsaid.
"It's almost like you are teaching one third of the puzzle but not understanding the rest of the two thirds,” says Anand Marri, associate professor at Teachers College, Columbia University.
Marri says when it comes to raising money savvy kids, the biggest mistake parents make is not talking about it.
He says kids want to understand and there are lots of opportunities to teach them, ;ike when your teen gets a job and looks at their first paycheck.
"They see a big chunk taken out for FICA and the kids always said 'who the heck is FICA?' and then that's you start talking about what FICA means and where that money goes to," Marri says.
Now even if you did not know what FICA stand for - Federal Insurance Contributions Act - you probably know it's the money taken out of your paycheck for social security and medicate. And so should your kids.
"If they have grandparents, you can talk to them about how they're supported,” Marri says. “If they have family members with health issues that are above the age of 65, these are things they can understand."
Once they are earning, it's also a good time to talk about big concepts like long term savings and compound interest. Marri recommends opening a Roth IRA for your teen and matching whatever they contribute, something he calls the Family 401k.
Marri also suggests you read at least one news article about fiscal policy every day, so both you and your kid can ace Econ 101 together.
"I'm a big fan of transparency when it comes to economics, so the more information people know, the better it is,” Marri says. “It's not this secret stuff that goes on behind doors. It should be something that kids can understand easily."