Why These ‘Building Blocks’ Make Kids Smart About Money
By Dan Kadlec
October 1, 2016
How do kids learn about money? The answers have eluded the financial literacy community from the start, and without a better understanding of what works the broad effort to teach money management to young people has shown disappointing results around the globe.
“We have all seen other research raising doubts about the effectiveness of financial education,” Richard Cordray, director of the Consumer Financial Protection Bureau, said recently. But he added, “I have never found it convincing. To me, all it says is that we simply have not yet been at this work long enough.”
The CFPB is trying to move the needle on this important issue and in September unveiled its Building Blocks to Help Youth Achieve Financial Capability. The report concludes there are three basic skills learned from ages 3 to 21 that lead to good money practices as adults:
Executive function Developed from ages 3 to 5, this skill facilitates problem solving and self control. It supports goal setting, flexibility and perseverance. It manifests in adult life as setting financial goals and sticking to a budget.
Financial habits and norms Developed from ages 6-12, this is essentially embedded rules of thumb that support healthy routine money management and manifest in adult life as things like paying bills on time and avoiding penalties and late fees.
Financial knowledge and decision-making Developed from ages 13-21, this skill is acquired factual knowledge and the ability to independently research and analyze. It supports financial planning and smart purchase decisions, and manifests in adult life as comparison shopping and sorting through marketing and sales pitches.
The big idea here is that financial education is less about numbers and more about critical thinking skills, especially among elementary school students. “Financial capability is not the same as financial knowledge,” Cordray said. “We have seen that financial capability goes well beyond just learning facts and is shaped by this broader set of attributes.” Here are some ideas on how you can incorporate these lessons in your school, community, or home,