To Teach Children Financial Skills, Focus on Math, Not Money

Math, not financial strategizing, is the skill most needed to handle the important financial decisions that all adults face.

Math, not financial strategizing, is the skill most needed to handle the important financial decisions that all adults face. And studies show that when schools require extra math courses, students get better at things like managing credit, avoiding foreclosure, and negotiating salary.

In a survey of schools that implemented personal-finance courses, however, Harvard Business professor Shawn Cole found that graduates showed no statistical difference within a 15-year span either before or after the personal-finance programs began.

"A lot of decisions in finance are just easier if you’re more comfortable with numbers and making numeric comparisons," said Cole.

Helping your children overcome the stigma of talking about money is an important first step, according to Cole, and it falls on parents to find the crucial balancing point. In many households, discussing the family finances is uncouth, or parents themselves may be uncomfortable.

Yet teaching children to see every event through the lens of cost-benefit analyses risks encouraging anti-social behavior, possibly losing friends who can help during those tough times in life when money can't.

Best-selling author and financial planner Bruce Feiler explains how parents can approach the touchy world of finance with their children:

"Actually try to limit the influence of money. After doing all this research — in our home we have chores; we have allowance. We do not overlap the two. Because if you do, it turns out the kids will do the chores just for the money. You get an allowance as part of being a member of our family. ... The point is when the kids are young, when the stakes are lower, let them make their own mistakes..."

Lynsey Romo, an assistant professor of communication at North Carolina State University, studies family information sharing. She echoes Feiler's comments and recommends that parents seize small opportunities to begin discussions of a financial nature with children:

"Ms. Romo found that subjects who report limited communication with their parents about money later in life feel 'clueless,' as if they don’t truly understand how credit cards or money management works. Instead of concealing sensitive topics, Ms. Romo recommends using financial discussions, no matter how sensitive, as 'teachable moments.'"

Finally, make finance an ongoing topic of conversation. In an analysis of more than 200 studies on the effects of financial lessons in a classroom setting, researchers discovered that one hour of financial instruction wore off after about five months. Eighteen hours wore off after around 17 months. And 24 hours disappeared after about 20 months.

Read more at the Wall Street Journal.

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