Smart Money, Smart Kids: Tips for teaching financial literacy and privacy protection to kids of all ages

It’s never too early to teach children and young adults about protecting personal information, how to save up for purchases and how to navigate the adult world by being able to dispute a fraudulent credit card charge or withdraw money from an ATM without a fee.

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CLEVELAND — New data show that the personal savings rate in the United States dropped to 5.1 percent this summer – the lowest level since 2009. While many Americans don’t sock away money because they’re dealing with imminent needs, many more spend that money on items they want but don’t need.

Children often model their spending habits after the adults around them. So now, as kids return to school and spend more time independent of those adults, it’s a great time for parents, grandparents or older siblings to teach children important financial literacy and life skills.

It’s never too early to teach children and young adults about protecting personal information, how to save up for purchases and how to navigate the adult world by being able to dispute a fraudulent credit card charge or withdraw money from an ATM without a fee. There are age-appropriate lessons for preschoolers, pre-teens, high schoolers and young adults going off to college or moving away from home.

One recent survey found that about one-third of parents never talk about finances with their children. Other surveys show far fewer have these important conversations. If someone with accurate information and their best interests at heart doesn’t teach them, the children can pick up potentially bad information from their friends, social media, the internet or even companies trying to sell them stuff they don’t need.

Young children and pre-teens:

Understand the importance of protecting your personal information. Don’t give out information such as your phone number, home address, Social Security number or birthdate to just anyone. It’s critical to teach children not to share this information over social media. If anyone or any website asks for personal information, any child under 18 should always check with a parent.

Avoid impulse purchases. You can start teaching your children to avoid impulse buying at a young age. If you’re at the store and your child always gets a small toy or a candy bar at the checkout aisle, that can be a bad habit to unlearn. Kids who learn discipline can avoid immediate gratification purchases as a teenager or young adult, whether it’s a new pair of jeans they don’t need or an unbudgeted last-minute concert ticket purchase.

Budget. Whether it’s for a new piece of sporting equipment or a car, learning to save money is crucial. Talk with your children about how they can save from their allowance, birthday money or part-time jobs. Next, help them calculate how much money they’ll need and formulate a budget to reach their goal. Then, help them comparison shop.

Realize the dangers of phone apps. Apps and social media are a part of everyday life. They help us stay connected to the world around us. But it can be easy to overlook the risk involved with making personal information accessible online, especially when that information can be recorded, bought and sold by the companies running the apps.

Same thing with cookie monsters. You’ve likely seen many websites display a “cookie consent” pop-up box. It’s easy to hit “accept” and move on. Don’t. Websites use our own info to track us and look for opportunities to exploit us or sell us stuff we don’t necessarily need. If you don’t have time to read what you’re agreeing to, don’t click accept.

Teens, especially once they start working or driving, they should understand everything from the first section for young children, plus:

Watch out for Buy Now, Pay Later schemes that may not be transparent or you may not completely understand. In many cases, shoppers end up sorry about the purchase because they pay unexpected extra fees or interest.

Don’t allow important issues to linger and become urgent. For example, promptly deal with a warning light on your automobile dashboard, a missing wallet, something that looks like a legal or government notice in the mail or an unknown charge on your debit card.

Understand the importance of protecting your personal information (part 2).  For example, don’t use a credit card or debit card at unreputable places or provide your Social Security number to everyone who asks for it, even on every job application. Learn to recognize attempts to trick you or steal your information, such as through phishing emails and imposter phone calls and texts. Young people can be too trusting with information that can be used in ways that are dangerous.

Make saving a priority if you have a job. Maybe you want a car, a new smartphone or a spring break trip. Whatever your financial goal is, almost no one makes all the money they need for that expense at one time. And if you learn the discipline of saving early, that habit will serve you well for the rest of your life. Start by saving $1 a week. You may say $1 a week is never going to amount to anything. It’s not about the amount; it’s about developing the habit. Once the habit is ingrained, you can increase the amount you save in the months and years ahead.

Learn how checking accounts and savings accounts work, as well as checksdebit cards and credit cards. There are pitfalls to be aware of with each. Here’s a good overview of the pros and cons of various payment methods, including through Venmo and other P2P apps.

The best lessons are taught by example. It can be helpful to share some household financial information with your kids, such as how you save every month, prepare for unexpected expenses and sometimes put off purchases. And show them some of your monthly bills.

When they reach 18 years old or move out or go to college, they should understand everything from the first two sections for young children and teens, plus:

Learn how to budget your money to pay for your needs — and how to distinguish needs from wants. Make sure you cover your required expenses (rent, food, utilities) first. Only then should you spend extra money on discretionary items. Many bank apps offer cool tools to track expenses on your credit card or debit card so you can get a better feel for what you spend your money on.

Never give out two-factor authentication codes to anyone by phone or text.

Realize that some colleges have dual-use student IDs that double as potentially dangerous debit cards — either closed loop debit cards (for use at certain campus and off-campus locations) or open-loop debit cards (for use anywhere). Recognize that the card associated with the college’s bank partner may not be your best deal. Our report also warns of innumerable potential fees, including ATM fees and overdraft fees. Also, the remaining balance of your student loan or grant money is often issued on a debit card. Both of these situations subject student-consumers to potential ATM fee-gouging. (Note: For loan balance disbursement, you must be provided a paper check or cash option.)

Be leery of multi-level marketing schemes that are rampant on college campuses and through social media. They can often be bad news and suck money out of your wallet.

The same warning goes for profession/personal development seminars. Often, these are designed to get you to pay membership fees (perhaps $195) plus you have to find maybe five other people to come. They try to attract you with the promise of “passive income.” You may not even completely understand the exact purpose or content of the seminars. The invitation is designed to get your money by making it sound like a good opportunity.

Most teens and young adults don’t like keeping paper. But always  keep your receipts, car maintenance records, leases, bank statements and other key documents. You can store papers in a shoe box or organized color-coded file folders or keep screenshots on your phone or laptop. Whatever works for you, because you’ll need some of them later. For example, the IRS says you should keep your tax returns for 3 to 7 years. One of my son’s friends threw away her apartment lease and later ended up having a big dispute about what she had signed.

Read what you sign and don’t sign anything you don’t read or understand. This is particularly important once young people turn 18 and their signature becomes legally binding. As an adult, if you agree to something bad in writing, failing to read and understand it before signing it is not a valid legal excuse.

Think about all the tasks adults deal with every day. Know how to make doctor’s appointments within your insurance network, dispute a fraudulent credit or debit card transaction, fill a prescription, book a flight or hotel and make appointments for automobile oil changes.

Understand debt. Learn about loans and credit cards, and understand compounding interest and how to manage repaying loans or credit cards. When it comes to the latter, you should try to pay the balance in full each month. Compound interest is bad with debt; it makes it difficult to get out of a hole. Compound interest is good with savings or investments, particularly when your interest or returns earn money.

Learn the importance of paying bills on time and building a solid credit history. Recognize how a credit score affects not just your ability to qualify for loans or credit cards, but also to rent an apartment and qualify for lower auto insurance rates.

Check your mailbox. Young people often forget that important items can come in the “snail mail.” Besides birthday cards with gifts and formal invitations to friends’ weddings, the mail is how you might receive checks, speeding tickets, replacement credit or debit cards, tax notices and other important documents you should not ignore.

Learn about income taxes and how to file tax returns (maybe with some help the first few years).

Know when to ask for help. A lot of financial paperwork can be very confusing, even to experienced adults. If you have a document, get a piece of mail or receive a phone call you don’t quite understand, ask a trusted adult for help. If you have a fraudulent or erroneous charge on your bank account or credit card, ask someone to help you understand your right to dispute it. If you’ve never bought a car before, take an older, experienced person with you. If you’ve never rented an apartment before, ask someone who has rented before to look over the lease agreement. If you get an overdraft fee and you don’t understand why, ask someone to help you. In very confusing or financially perilous circumstances, it may be worth hiring a lawyer for help. Most of the time, the solutions are easier to navigate if you just ask someone who’s been through it before.


Teresa Murray

Consumer Watchdog, PIRG

Teresa directs the Consumer Watchdog office, which looks out for consumers’ health, safety and financial security. Previously, she worked as a journalist covering consumer issues and personal finance for two decades for Ohio’s largest daily newspaper. She received dozens of state and national journalism awards, including Best Columnist in Ohio, a National Headliner Award for coverage of the 2008-09 financial crisis, and a journalism public service award for exposing improper billing practices by Verizon that affected 15 million customers nationwide. Teresa and her husband live in Greater Cleveland and have two sons. She enjoys biking, house projects and music, and serves on her church missions team and stewardship board.