Financial Literacy for Kids by Kim Kiyosaki

Financial Literacy for Kids

The one thing every parent should do to supplement their children’s education

If you talk to parents of grade schoolers these days, they’re likely to complain about how it’s suddenly impossible to help their children with their math homework. Why? Because of a new system for teaching math, called Common Core—a complete departure for those of us who learned arithmetic prior to 2010. Sure, we arrive at the same answer, but how we get there is completely different. And because students must show their work, our “old” math skills won’t help them learn these “new” concepts.

Of course, I think we have far more to complain about than new math methodology — like why schools aren’t teaching kids about money.

What’s the state of financial literacy in the United States?

Let’s explore some statistics of the current financial state of affairs for more Americans, to help lay the foundation for why this it’s so alarming that we aren’t doing anything to improve the financial literacy for kids:

According to a recent assessment of financial literacy from the Organisation for Economic Co-Operation and Development (OECD), one in five American teens fail to meet the level to be considered financially literate. By comparison, only about one in 10 Chinese and Russian students fail to meet that benchmark. The 22% of American students who failed to meet the baseline of financial literacy can "at best" identify financial products and terms and make simple decisions on everyday spending, the OECD said.

Then, there’s the 2018 biennial Survey of the States by the Council for Economic Education, which reports that while 45 states have included personal finance in their standards, only 24 states require high school courses to be offered. Worse yet, only 19 states require students take those courses, and only seven states require testing. This survey is seen as an important benchmark for our nation’s progress in education — and I have to say I’d grade this “progress” as an “F.” Why isn’t there a larger emphasis being placed on financial literacy in our country’s school systems?

According to the Federal Reserve, Americans owe a record $1.04 trillion in credit card debt, which is up from less than $854 billion just five years ago. On average, Americans owe $6,354 on bank-issued credit cards, and according to Nerd Wallet, households with revolving credit card debt will pay an average of $1,141 in interest this year. If this sounds a little too familiar, don’t miss how to get out of credit card debt in 8 steps.

And don’t even get me started on savings for retirement — one in three Americans has set aside $0 for their golden years, according to a GoBankingRates survey. As for the others? A whopping 56% of Americans have less than $10,000 saved up for later in life.

All of these stats combined are further proof that financial ignorance comes with a hefty price tag—a burden our future generations (read: your children!) are unwittingly going to face when they reach adulthood.

How important is financial literacy for kids?

Those statistics on financial literacy are hugely alarming, considering money is such a basic life skill in our society. These figures highlight just how badly our school systems are failing our children.

As you know, money touches everything in our world — from eating, shopping, and traveling to buying a house, getting married and having children. Every single day, we are all faced with financial decisions, and they begin early in life. As soon as a child earns an allowance or gets $10 from grandma for their birthday, those financial decisions begin to accumulate. But teaching kids about money is far more complicated than just telling them to save that money until they have enough to buy the toy they want.

Money and finance are all about numbers. There’s simply no way to become financially fit and reach financial freedom if you aren’t comfortable working with numbers. And I’m not talking about advanced calculus here—nearly every financial decision you need to make in life comes down to basic addition, subtraction, multiplication and division.

Even more disturbing is the realization that even if a child happens to be a mathematical genius and moves into advanced classes, their academic success doesn’t necessarily translate into financial literacy—once that child turns into a young adult, and is out of school and working professionally, he or she can easily be headed down a slippery slope of mismanaging money. Why? Because their education failed to teach them fundamental lessons about money and didn’t provide any real-world applications so they could practice.

The truth is, your child’s financial education is only going to come from one of two places: either learning from their own mistakes (which can range from costly to devastating, depending on the lesson) or learning from you. Isn’t it in your best interest to take a proactive approach to helping your kids navigate the financial waters, so you set them up for a successful future (and don’t become a financial burden on you or our society later in life)? Since our school systems aren’t giving your kids the financial education they need, it’s up to you to take on this responsibility. And the earlier you start, the better.

Now, this may seem like a daunting task to many parents, especially those who don’t consider themselves savvy in their own financial matters and haven’t learned how to achieve financial independence. This is exactly the reason Robert wrote his first book: Rich Dad Poor Dad. His poor dad (who had a Ph.D., by the way), worked hard his whole life yet struggled financially. The only way Robert learned how to be financially literate was from his best friend’s dad (who never finished eighth grade, mind you) — this “rich dad” went on to become one of the richest men in Hawaii because he believed in total financial self-reliance and created his own wealth through owning his own business and investing. If Robert had only taken advice from his own “poor dad,” he would have followed in his footsteps.

But that’s exactly why you must start now—otherwise, your children will end up in the same uncomfortable position someday. You have the power to stop this cycle of financial illiteracy, you just need the right resources to complete your education so you can pass it along to the next generation.

How do you teach kids about money?

The best way to begin teaching money management to kids is by helping them understand the concept of cash flow—money coming in, money going out, and the remaining money at the end of a specific time period (usually a month, quarter or year). Teaching children the relationship between earning, spending and saving will help them understand the value of money. And you’ll definitely want to do this long before they turn 18 and are inundated with enticing credit card offers as they head off to college.

Of course, to the average 9-year old, learning about accounting, finance and investing might sound like a real drag. That’s where game play comes in handy. Because playing games is an incredibly effective way for children (and adults) to learn, consider investing in a tool such as CASHFLOW® For Kids (recommended for ages 7-14) or CASHFLOW board game to accompany your education and teachings. These financial resource board games start you in a typical 9-to-5 job (yawn) and take you on a journey to build up an arsenal of assets that will propel you into the fast track where real wealth is built (the fun part).

For your tech-savvy students, we developed our free online game, CASHFLOW Classic. Learn the same principles of how to get your life on the Fast Track found in our board games but with a world-wide community of like-minded game players.

The CASHFLOW games not only teach you how to invest and acquire assets such as property, stocks, businesses and precious metals, it also teaches you how you behave within various investing scenarios. It’s a safe environment in which you can test out strategies for building wealth you might be reluctant to try in real life. These interactive resources are a great way for the entire family to practice building a more secure future in a fail-safe and lesson-rich zone.

My best advice is to start teaching kids about money early — there’s no such thing as being too young to learn about financial literacy. Plus, it’s the perfect time to head off any wrong notions or misconceptions about finances before they learn bad behaviors from their friends, television shows and other influential sources.

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And I’m not alone on pushing financial literacy for kids long before most parents would think to do so. When asked what he thinks is the biggest mistake parents make when teaching their kids about money, billionaire Warren Buffett said, “Sometimes parents wait until their kids are in their teens before they start talking about managing money — when they should be starting when their kids are in preschool.”

They say that families who play together, stay together. But I believe that families who play together can retire early and spend their days however they want together. Doesn’t that sound like the quintessential American Dream?

Original publish date: June 08, 2017