Your Kids, Their Money

By Clifton Corbin

Your Kids, Their Money gives you the tools to teach your children about the one area many parents never talk about - money.

 

Praise for Your Kids, Their Money

"For parents who want to empower their kids with financial wisdom, this book is for you."
Tamara Levitt
Head of Mindfulness at Calm & Author of Happiness Doesn't Come From Headstands

"Financial literacy has improved in schools over the years, but it still isn't where it needs to be. Clifton helps fill in the gaps. Your Kids, Their Money is a must-read for parents looking to raise financially responsible kids."
Sean Cooper
Author of Burn Your Mortgage

"Your Kids, Their Money is an excellent guide to the foundations of financial literacy. From how to handle allowances to how to think about wealth, Clifton Corbin provides both plenty of practical tips and a clever analysis of what money really is. It might change your own understanding of personal finance as much as your kids'."
Erica Alini
Author of Money Like You Mean It

 

Drawing on his master's in business administration (MBA), finance experience, and practices with his own children, Clifton Corbin provides a guide for the modern parent. In this book you will learn how to educate your children on the basics of money management such as allowances and first jobs, borrowing, credit, and investing, in ways that make sense to parents and appeal to kids.

 

Clifton's innovative approach starts by identifying teachable moments during everyday activities. You will see how to: 

• Involve your children in the family's finances, 
• Explain where money comes from, 
• Teach why it's essential to invest, manage debt and donate, 
• Gain tools to explain why sometimes you just can't afford some things, and
• So much more.

Throughout the book, you and your kids can participate in activities and games to engage further with financial literacy and build greater confidence.  

Your Kids, Their Money is the clear and simple guide you need to help teach financial literacy to your children. Applicable for kids of all ages, this guide is an investment you will want to make in building a solid foundation for your children's future.

• Language: English
• Publisher: Patterin Publishing
• Release date: Oct 27, 2021
• ISBN: 9781777869526

Book preview

PART I

Why Do Kids Need to Be Financially Literate?

1

Our Kids Need Our Help

Money is a fundamental part of life. It undergirds everything we do, from the moment we wake up to the moment we go to bed. But if you have looked at any headlines lately, you will have seen some disconcerting trends.

Outstanding Student Loan Debt Reached an All-time High in 2020 at $1.57 Trillion.

75 Percent of Americans Are Winging It When It Comes to Their Financial Future.

Year over year, money is noted as the top stressor among Americans.

As you can see, there is growing debt, less planning, and increasing stress. All of these financial woes are caused by a growing deficiency of financial literacy—that is, a lack of understanding of how to make sound financial decisions.

Researchers⁠ have found that people who lack adequate financial literacy spend more on fees, pay higher interest rates, and accumulate more significant debt. Additionally, they save less and are less prepared to manage financial emergencies and plan for retirement. On the opposite side of that coin, people who are financially literate have higher savings rates and pay less in fees. Adults educated in personal finance invest their money more wisely. Moreover, 87% of Americans⁠ agree that "nothing makes them happier or more confident than feeling like their finances are in order." The fact that a majority of Americans agree on anything should be telling.

According to a 2018 survey⁠ of financial advisors, over 95% either strongly agreed (78%) or somewhat agreed (17.8%) that financial literacy is an issue in the United States. A similar 2018 survey conducted by the polling firm Ipsos found that 85%⁠ [of] Canadians agree that financial literacy in Canada is lacking, and this lack of knowledge is contributing to Canada’s consumer debt problem. Unfortunately, this issue is not being addressed before our children start to struggle with it. And we are seeing the impact of that lack of attention in our youngest adults. According to AIG’s 2019 report Money Matters on Campus, only 53% of American college students felt prepared to manage their money. A third of students who reported having a credit card already noted that they had more than $1,000 in debt, and the percentage of students planning to engage in all [financial] planning behaviors has been decreasing for the past seven years.

So what is to be done? Most agree that schools should address this problem, and fortunately some Boards of Education hear the sirens. But not all of them. Too few states consider financial literacy essential or rigorous, or a scientific topic, Annamaria Lusardi⁠, Academic Director of the Global Financial Literacy Excellence Center at George Washington University, said. We see states that don’t require the student to pass the course, or they don’t train the teachers, or it’s an unfunded mandate. That is why AIG’s report found that only 35% of the students sampled reported having ever taken a personal finance course in high school. To make matters worse, only 40% of students who graduated from high school within states with a mandatory personal finance class have ever taken the course.

Even when schools manage to include financial literacy education, it does not seem to be doing much good. Only 55% of students who took such a course in high school reported feeling prepared to [manage their money] when they reached college. That is a clear indicator that the quality and timing of the high school courses are insufficient to meet our children’s needs. This material needs to be taught early and often for it to be effective. Most students who do have access to these courses are not receiving financial literacy instruction until their senior high school years, right before they head off for college or university. This is way too late. Consider this fact from the AIG report: only 22% of students who take out a loan feel they have the education, information, or support to be able to pay it off. Is it any surprise that the Brookings Institution estimates that 40%⁠ of student loans will end in default by 2023?

The evidence is clear that understanding money is a fundamental part of being an adult. We know that an education in financial literacy is critical, but our schools are not doing an adequate job of teaching our children. We cannot just wait until our child is filling out student loan applications to start talking about managing money. So, where does that leave us?

We as parents have to be the driving force that prepares our children to manage the financial world. Otherwise we will be leaving them unprepared to navigate the complexities of accumulating wealth and managing their finances in adulthood.

I can hear some of you out there, countering that you didn’t have personal finance classes, and your parents didn’t drill you on financial literacy either, yet you turned out fine. That may be so in your particular case, but it is reckless and irresponsible to expect children to figure out finances independently, with no help from schools and their parents. We don’t toss our kids the keys to a car when they turn 16 and expect them to figure out how to drive. Similarly, we can’t and shouldn’t wait for them to get a paycheque and a credit card, and just hope they will know how to save money and deal with debt.

So just as we sit beside our kids when they are learning to drive, we need to do the same and guide them in the world of personal finance. We need to be there early and often as they take the wheel of managing their finances. They need you to instruct and assist them. They need a parent there to tell them to check their blind spots. We know how much impact financial decisions have on our lives. It’s vital to make sure that our children are ready to meet the financial challenges they will undoubtedly face.

Teaching financial literacy to our kids has to be a priority. We need to instil foundational skills of money management when they are young. According to the Consumer Financial Protection Bureau⁠, a U.S. government agency created to protect people from unfair banks, lenders, and other financial companies, Young people who develop the fundamentals of financial capability are more likely to become financially secure adults. They go on to say that we can help our children by giving them real-world experience making financial decisions first hand. We can help prepare our children by making sure they learn the skills they need before they need them, not after.

While we wait for the school systems across the nation to catch up and start teaching our children what they need to know to function financially as adults, we must step in to fill that void. This book is the first step in that direction. Use the concepts in this book to open up a dialogue with your children on the topic of personal finance.

This book is here to provide you with the confidence you need to have money discussions with your children. Let it be your tool kit to define the different parts of personal finance in ways that you and your child will understand. Use it as a primer on money-related topics, where you will also find exercises and activities that you can do with your child to reinforce learning.

This is an essential gift that you should give your child. I know that talking about money can be very uncomfortable for some people, but the value you provide to your child far exceeds any discomfort you may feel. This book aims to give you the tools to inform your children and give them the skills they need, before they need them.

2

You Benefit When Kids Know About Money Too

I want to focus a little more on some of the benefits of teaching your children to be financially literate. I’ve touched on a few advantages, but I want to highlight the gift you are about to give your child.

Strengthen Your Relationship

The main benefit of an open dialogue about money will have nothing to do with money. Being open and honest with your children about money matters will build a stronger, more positive relationship with them. Kenneth Barish, author of Pride and Joy: A Guide to Understanding Your Child’s Emotions and Solving Family Problems, notes the importance of expressing enthusiastic interest in your child’s interests, even if these are not the interests you would choose. That is the surest way to engage children in dialogue and a first principle of strengthening family relationships.

There inevitably comes a time in all children’s development when they start to notice money, its use, its power, its mystique—and they become curious about it. By taking an active role in feeding their interest, you will benefit from having a more engaged child with whom you have a healthier relationship. Barish goes on to say that parents should share [personal] stories. Talk with your children about experiences in your own lives. As you will see throughout this book, there is no way to discuss money without sharing personal stories. Your life stories, trials, tribulations, and successes will resonate with your children. Help to educate them while strengthening your connection.

We want our children to be comfortable to come to us when they have questions about how the world works. To keep them coming to us for advice, we need to be willing to answer their questions honestly, including those about money, and thereby to demonstrate that we value and love them.

Additionally, being open and honest about our finances shows our children that we trust them. We trust them enough to talk about something that they will intuitively know is a personal matter. We must give trust, to gain trust. What better way to imbue them with trust than to create a safe space to discuss money matters?

Make Them Financially Fit

In 2017⁠ the Kentucky State Treasurer, Allison Ball, was giving a talk to high school seniors. The conversation focused on managing credit and other components of maintaining good personal finance habits. During her address, she noticed that she kept getting quizzical looks from her young audience. We kept using the word ‘interest’ and we kept getting blank stares, Ball recalls. After a while, she asked the students if they knew what interest is. Not one student knew.

This example is not an exception. I’ve already noted that even when children take personal finance courses in school, only 55% reported feeling prepared to manage their finances. Seventy-two percent of employers conduct background checks on all new hires, and 29% of those checks include credit reports.

Think about that for a moment. Your child could finish high school and without much effort amass tens of thousands of dollars in debt, destroying their credit and hampering their ability to find a job to start the process of digging themselves out of the mess they have created. All without ever hearing or understanding the word interest.

Students are facing a financial crisis because they lack an understanding of how to manage the money they have earned and borrowed. Stress and anxiety are at unprecedented levels. Adults are postponing major life events because they feel financially insecure. One in five millennials are actively delaying having children because they feel they can’t afford a family. Millennials are also waiting to get married⁠, buy a home, and save for retirement—all because of debt.

Avoiding these hardships is possible if we provide our children with a better understanding of how to successfully manage their money and the possible repercussions of not doing so. Give them a tangible skill set with both short- and long-term positive effects on their well-being.

Theory to Reality

Teaching and giving your child a chance to practice what they learn will allow them to internalize the financial concepts you discuss. They’ll make some mistakes along the way, but when they make the mistake with you, like not paying back money they owe, the stakes and consequences will have a much smaller impact on their lives. We often learn more from our mistakes than our successes, and so giving your children opportunities to learn in a safe, low-risk environment will benefit them long into their futures. More importantly, they will have built the confidence and knowledge needed to manage their finances. They will have practiced shopping for clothing, food, and other necessities. That practice will better equip them to handle and stay within a budget when they live independently.

By saving for toys or other big-ticket items, they will be building the habit of target-setting and delaying gratification, invaluable skills when the time comes to create rainy day funds and invest in retirement savings accounts.

You are going to talk to your child about interest, banking, and borrowing, as well as empowering them from a young age to shop for themselves. That combination will provide them with the skills they need to shop around for bank accounts, credit cards, and other financial services that offer them the best service at competitive rates. They will also be more attuned to investment opportunities and take advantage of the retirement savings vehicles at their disposal.

People with strong financial literacy skills save more, pay less in fees, have higher credit scores, are better investors, and have less debt. The benefits of teaching and allowing your child to practice financial literacy skills at a young age will be innumerable. They will grow up to be adults who can make wise financial decisions that will benefit them from the time they enter the workforce to the time they retire, and beyond. Financial literacy directly correlates to our children’s wealth building and well-being throughout their entire lives.

Keep Learning, Together

Lastly, as there is always more that even adults can learn about managing finances, what better way to learn than to do it together with your child? Our children do what we do, and not always what we say. So if your finances are messy—and it happens to all of us—take the time to get them in shape. As you develop and execute your financial plans, include your children in the process.

If you are committing to paying down some debt, include them in those discussions. Let them observe the compromises and trade-offs that are necessary in real life. Do you need to cook more and eat out less? Let them see that it is not always easy, that sometimes adults slip too. Let them experience the importance of having an emergency fund when, say, an unexpected car repair comes up.

Let your children sit in as you build a budget. Let them see how budgeting is an expression