Why did they teach me calculus but never explain how money works?
Have you ever heard someone make that lament? Perhaps that question has even crossed your own mind. It’s a common refrain among early professionals when they see their first paycheck and wonder why so much of it is missing or get their first student loan repayment bill in the mail.
So is it true? Did an entire generation of Americans manage to escape childhood without a single lesson in personal finance? Or perhaps lessons were taught that simply never stuck.
The Problem with Passive Financial Education
Several decades of research have indicated that young people learn more when given an opportunity to apply their new knowledge. This process, termed “active learning,” results in greater subject proficiency and comes with an unexpected side effect: the students often report feeling that they didn’t learn very much, even as they outperform passive learning peers on tests and assignments!
But wait! You might be thinking. I gave my children a piggy bank in kindergarten. We ceremoniously place 10% of every birthday check from grandma in the family tithing jar and dutifully carry the contents to church the following Sunday. My children have had plenty of “active learning” with money!
It’s true that many children have experience with money from an early age, but we must dive into the very meaning of money to understand what kind of relationship the average child has with finances.
Understanding the True Nature of Money: Why Financial Literacy for Youth Goes Beyond Spending
Economists tell us that money serves three purposes:
- It is a store of value,
- a medium of exchange, and
- a unit of account
Young people who receive money for birthdays and Christmas and perhaps as an allowance are most familiar with the second two uses of money. They embrace its role as a medium of exchange as they trade the otherwise useless paper for candy and toys. They glory in its utility as a unit of account as they watch their pile grow and brag to brothers and sisters about how much they have.
The Missing Link: Money as a Store of Value
But what young people often fail to grasp is money’s primary purpose as store of value. In most cases, money ultimately represents time as well as effort. Someone earned that money by spending time building and selling something or providing a service. And the ability to build or serve itself represents hours of learning and practice to acquire marketable skills. If a child can’t draw a direct line between personal effort and remuneration, the experience of receiving and spending money will be nothing more than a lesson in “easy come, easy go.”
This is why young people tune out during discussions of tithing and savings and managing debt. Offering God 10% of our wages essentially means that 10% of our time at work is unpaid, giving extra emphasis to Paul’s injunction that we do all work as unto the Lord. Giving God 10% of the money that fell out of the card from Aunt Mildred doesn’t quite carry the same weight.
Similarly, saving has little meaning when a young person has no financial obligations and can spend frivolously without greater consequence than a stomachache from too many Sour Patch Kids. And a loan? That’s like graduation money the bank gives you, right?
The Importance of Financial Literacy: Starting with Work, Not Money
Perhaps the key to educating young people about money is to start with work. And not just talking about work but actually creating opportunities for our children to engage in meaningful labor. Teaching them to fish, as the expression goes, by showing them what happens when they add value to the lives of others.
A turning point in my childhood was when I realized the economic potential of our family’s snow shovel in winter. There was no shortage of neighbors willing to pay me to clear their sidewalks and driveways if I was willing to put in the time and effort. While friends spent the day building snowmen and throwing snowballs, I was stuffing my coat pockets with dollar bills. When my parents saw the haul and reminded me to tithe, I admit there was some real hesitation.
How Work Teaches Financial Education Naturally
Giving children real opportunities to work offers a host of benefits. It shows them that they are not mere consumers but can make a meaningful contribution to the family and community. (This, by the way, is the real antidote to low self-esteem, rather than the social-emotional technobabble clogging most parenting books and blogs these days.)
Work also teaches young people the basics of economics as they directly experience the connections between the cost of producing a good or delivering a service, its popularity, and the price it can fetch on the open market. It might even help them figure out how they want to provide for their own future household without spending precious time and money “finding themselves.”
Teaching Kids About Money: Building Character and Community Leaders
The subjects students learn in school are important and often lend themselves to adjacent topics. But no topic is more universal than personal finance. Ensuring that your children learn about money and all its roles – store of value, medium of exchange, and unit of account—will set them up to thrive as adults. As they grasp the connection between work and money and enjoy the fruits of adding value to the lives of those around them, they will become ready to lead their families, churches, and communities.
Ready to put these financial education principles into practice? America’s Christian Credit Union offers specialized savings products and financial guidance to help you teach your children the value of work while building for their future.
Looking for more financial resources for your homeschool journey? Here are some of our favorites:
- Education Savings Made Simple: Start Early, Save More
- What Homeschoolers Should Know About Biblical Financial Literacy
- You Need a Budget
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