Teaching Kids the Color of Money

A local insurance agency leaps into financial literacy monthPRINCETON – Kids these days. Born into a world where it’s standard procedure to start pointing and clicking their way through life almost before they’re out of diapers, one thing remains the same: Today’s children are no more sophisticated about the value of money than their counterparts of yesteryear. And since April is “National Financial Literacy for Youth Month,” financial firms are working to bring children up to speed.

Lessons about money “probably should begin when the parents start giving their child an allowance,” says Joe Savino, managing partner of Savino Financial Group, a 130-employee general insurance agency in Princeton that is part of the Northwestern Mutual Financial Network.

“If you look at this globally, there’s really no formal training, education, [or] curriculum on financial literacy for children,” Savino says.

Statistics show that children—and their parents—are sorely in need of financial education. The JumpStart Coalition for Personal Financial Literacy, a Washington, D.C.-based group, says the average high-school graduate lacks the basic skills required for managing personal financial affairs, and many don’t know how to balance a checkbook.

That’s despite the fact the kids are big spenders. Two years ago the coalition estimated that children between the ages of 4 and 12 would spend $51.8 billion in 2006.

Meanwhile, the National Council on Economic Education last year found that high-school students who took a 24-question economic quiz had an average score of 53—or a letter-grade of F. Adults averaged 70—just barely a C—on the same quiz.

Savino says that to help remedy this situation, “we began to put out to our clients some really simple things.” One learning tool he advises parents to use is a piggy bank with compartments for saving, spending, charitable giving and investing.

He also offers a free booklet called “Growing Smart Kids—From Diapers to Diplomas,” created by Northwestern Mutual Financial Network. It offers practical advice, like starting a “401(kids)” account, where the parent matches every dollar a child puts into savings.

“There’s sort of this immediate gratification society we live in, so [children) want it now,” Savino adds.

He says his two college-age children get credit-card offers. “I think, hopefully, they might have had a little benefit because we’ve gone through some of this [financial education]. But a lot of kids get these cards. They go out and buy stuff, and then they crank up some serious debt.”

Savino, whose agency also has offices in Clinton, South Brunswick and Wall, says if he could dispense one piece of advice to youngsters, it would be to save systematically. “Just understanding the concept that, of everything you earn, a small part should be saved for yourself for either an emergency, an opportunity or retirement,” he says.

“Some might say the Baby Boomer generation has done such a great job of protecting and sheltering and doing things for our children that we might not have given them one of the gifts—which is education on money,” Savino says.

William Horahan, a former chairman of the New Jersey Financial Education Coalition, a non-profit affiliate of JumpStart, says money has traditionally been a complicated subject to discuss, especially between parents and children. “It’s a difficult line to draw,” Horahan says. “You don’t want [your children] to grow up so fast, but you want them to be savvy at some point.”

“It’s like Santa Claus. You tell them there’s a Santa Claus, but in a way it defeats what you’re trying to do.” Santa is “someone that will come and give you something for nothing if you just sit there and wait, which doesn’t happen.”

The coalition’s mission is to collaborate with organizations that support or provide financial education and to create strategies for teaching financial education in the public school system, starting in kindergarten.

Gifts That Pay Dividends

Piggy banks and change sorters are a fun way to start the savings habit early while teaching kids how to set short- and long-term goals.

Computer software, magazine subscriptions, or books about personal finance can be both entertaining and educational. Coloring books with money-related themes are good choices for younger age groups.

For older kids, consider mutual funds. Kids can read the prospectus, see which companies the fund invests in, and track its progress.

Stocks can make great presents too, especially if you buy shares in a company the child knows, such as a manufacturer of athletic shoes or a fast-food franchise.

A few coins left over from international trips, along with a book on coin collecting, could inspire a young person to start a coin collection.

Source: New Jersey Financial Education Coalition

E-mail to csarfaty@njbiz.com