by Wendell Cayton

I recently became an advisor to a group of grade and middle school students participating in a stock market simulation game. Sponsored by Cal State Hayward, the game allows student teams from around the country to invest a mythical $100,000 in stocks and mutual funds. The winner’s are the various age group teams with the greatest investment value at the end of the contest.

From my experiences helping families with their financial affairs, the real winners are all the participants who learn some rudimentary fundamentals about money, prices, markets, and economics. Unfortunately, this part of their education is often overlooked in their home life, where money matters, like sex, is often a taboo topic of discussion.

For too many children, home finance matters consist of a parent(s) sitting at the kitchen table, late at night, once a month scratching figures on a pad, and writing checks. This is always followed by a noticeable deterioration in mood, and proclamations beginning with the negatives, “We can’t afford,” “Have to cut back,” and “No more.” Money is something just not spoken about in polite company.

As a result, children grow up and enter adulthood with few positive ideas about handling money. At 18 they enter the adult world of money and fantasy when they are inundated with credit cards and ample temptations for spending. I relate this to giving a child a very powerful car… and no driving lessons!

The need for financial education for our children is quite clear. According to Dara Dugay, Executive Director of the Jump$tart Coalition for Personal Financial Literacy in Washington, only about 10% of high school graduates have learned personal finance. She points out that the average American is spending more than he or she is saving, a fact that reinforces the idea that children learn spending habits and not savings habits.

Fortunately there are a great many resources available to parents and students alike who want to learn about personal finances. Nonprofit organizations like Jump$tart, the National Endowment for Financial Education (www.nefe.org), and the National Institute for Consumer Education (www.emich.edu/public/coe/nice) have a wide offering of resources and educational materials.

Both parents and children might benefit from reading a number of the fine books now available on the topics of money and personal finance such as Robert Kiyosake’s Rich Dad, Poor Dad, or Willard Strawski’s Kids, Parents and Money.

Here are a few simple stratagems parents can undertake to get their children started out in the right direction:

First, have a simple plan with a few easy to understand goals. Write down several meaningful goals for the child to work toward. Help the child set up a budget to reach the goals. Help the child learn the principles of time, the value of money, and delayed gratification. Also, teach the importance of credit and the responsibilities that go with borrowing.

Second, teach the child the principal of saving first and spending second. I once knew a financial planner who liked to tell his listeners that there were two types of people: “Those who spend first and save what’s left, and those who save and spend the rest.” The truism of life is that the former always end up working for the latter!

Finally, relate financial matters to the real world. For example, instead of harping on children to turn off the lights, show them the power bill and let them calculate what it costs to leave on a light or the TV. Make it a participatory learning experience.