Grading the Experts’ Money Advice
And some updates on Paper Robots’ summer vacation
A few weeks ago Forbes did an article on financial education for kids. The article was entitled “Teach Your Kids About Money with these Ten Expert Recommended Activities.”
In this article I’ll grade the experts’ advice. This isn’t to be snarky or catty. It’s to clarify where current expert thinking excels and where it falls short. It’s also to show how my own thinking on teaching kids about money is different – which will be coming out in January in my book, Teach a Kid to Save: A Fun, Hands-on Approach to Building Smart Money Habits. The thesis of TAKS is that kids need opportunities to make meaningful choices about money over time. Those are the criteria I’ll use to grade these ideas.
All these ideas are helpful and I’m so glad that people are working in this space. But some ideas are better than others. Let me know if you would change any of my grades. Here goes.
Magic Kingdom role-playing game. “Together with your child, create a character who rules over a magical money kingdom. Talk about the choices this leader must make with a limited supply of golden coins. Options can include dragon rides, castle-building, education for kingdom residents or anything else. Let your child lead the story, as you ask questions about the long- and short-term benefits of each decision.”
Grade: C+. This could elicit fascinating conversations about money values. But I fear that unless you’ve been the Game Master a world-building scenario already, the lesson might get lost. Simplify the scenario with basic “what would you choose?” choices.
Coin-toss Challenge. Give small children a coin-toss challenge, in which they can try to throw coins into save-spend-give jars.
Grade: C-. The save-spend-give jars are great, but the activity doesn’t match the lesson. Instead, just allow them to make the real choice: should we save, spend, or share this money we just got? Sure, toss the coins; have fun. But the kids are ready to actually use the jars for budgeting.
Needs vs. Wants Flashcards. Show flashcards with pictures of things and ask if it’s a need or a want.
Grade: B-. At first I thought that kids already get flashcards at school; why would they want them at home? But then I thought: because they love to play with their parents, that’s why. I can see my six-year-old doing this activity with me for 10 minutes or so (but that’s it). Needs vs. wants can be a good rule of thumb for helping people make choices, but we should move on to teaching about goals and priorities.
Grocery Store Games: You’ve read ideas like these in previous Paper Robots posts, here and here. Ask the kids to help with the grocery list, the prices of various goods, and find where products come from, how big things are relative to their price, the choices we make between products, and so forth. The benefit is that these lessons are authentic.
Grade: Pass.
Compound Earnings Fitness Challenge: make your kids do squats or jumping jacks and point out how the difficulty compounds over time. Then tell them about compound interest.
Grade: Incomplete. This can’t be about earning compound interest because it gets miserable. You could make it about paying compound interest — you know, debt. But your kids would be in no mood to be told about compound interest by the time they were miserable enough to get the point, you drill sergeant! (“Kids, feel that stitch in your side? That’s how it feels to be in debt!” “Dad, that can not be why we’re doing this!”) Now, teachers could get a couple rambunctious high school boys to do a burpee competition in class as an illustration! That could be hilarious and instructive.
Compound Interest Blocks: demonstrate how compound interest grows by stacking up blocks. Both the base and the height must grow over time.
Grade: C. Kids who are old enough to learn about compound interest are ready for real numbers. Just show them the money, not blocks. There’s no substitute for the compound interest calculator from EconEdLink. Trust me, their eyes bug out when they see the savings grow.
Buy the Brand Game. If your child asks you to buy a branded product, the expert encourages you to “Try asking: Would you rather own the brand or just buy from it? The question encourages a perspective shift from spender to owner. Use these conversations to start a simulated portfolio, jotting tickers, prices and dates in a notepad or spreadsheet.”
Grade B. This gets a bump because kids really need to learn the perspective of a producer (i.e. investor or seller), not just a consumer. I think kids would be frustrated if they asked for something and their parent said “no, but let’s start a spreadsheet about something I want to teach you!” A simple tweak bumps it to an A: make a summer deal with your children that for a couple stocks for which they can track and explain its fluctuations, you’ll buy the products they asked for. (Sure, it's a spend, but it's a great way to get conversations going.)
Comparison Shopping Challenge. Let the kids help you comparison shop. Pretty straightforward.
Grade: A. You are engaging them in real-life money situations that they can understand. They know they are helping the family and adding their voices, not just playing a game.
The Lemonade Stand. Help the kids start a lemonade stand. You can enrich the experience like this: “encourage the kids to budget for ingredients, set pricing with profits in mind, make sales projections and calculate their results.”
Grade: A. The lemonade stand is the most classic part of financial education! The kids learn what it’s like to be on the other side of the counter. Their business choices matter.
Conversations to Teach Kids About Money. Involve your kids in real conversations about family financial choices. Not the really stressful choices; the kids aren’t grown-ups yet. Involve them in choices that matter and that are interesting without causing fear.
Grade A.
Summary: You see the trend? The better techniques are the ones that are closer to real life. Even with small children.
Too many of the experts rely on games that come with metaphors. The problem with this approach is that the games aren’t fun enough and the metaphors aren’t clear enough. By the time the kids get the game, they’ve lost what it stands for. Sure, do the games. But a simple illustration isn’t enough. The kids need ongoing modeling and practice.
Money is interesting all by itself. It reflects real-world choices. Kids need opportunities to make meaningful choices about money over time. Involve the kids in choices about money that matter to them, and they’ll become eager to pitch in their ideas. Best yet, you’ll model responsible decision-making that the kids can emulate.
Updates:
Friends, Paper Robots is going on summer vacation. It will return in September with loads of new content. This blog has been going on since March 2024. Thank you all so much for reading and for being a part of the conversations that keep it going.
Drop me a line in the comments or via email. I want to hear what you think. I will reply, seriously!
This week I’ll be traveling to Tanzania with my wife to do a week-long teacher education institute for Tanzanian high school teachers–similar to what I do here in Virginia.
Teachers can attend the VCU Center for Economic Education’s Mini-Economy Institute, July 29 and 30, or our institute on Econ in World History, entitled “Silk Roads and Sunken Cities,” which is (tentatively) August 5 and 6. You can also see pictures from our recent Mini-Economy Market Day here.
Teach a Kid to Save is moving along. I’ve turned in final copyedits, and the cover art has been designed! Thank you so much for being a part of this journey.
Stephen
I am enjoying your posts. I hope you have a great summer!