The Importance of Teaching Our Children Financial Literacy

An Interview with Randy Loren by Jennifer Shakeel

Teenagers and Money - The importance of money managementThere are times in my profession that I am blessed with the job of interviewing amazing people that are trying to do something incredible to help children and adults. This past week was one of those experiences. I was able to interview Mr. Randy Loren, author of the book Climbing the Money Mountain. This book, his mission really, is to make sure that each and every child in this country leaves high school with a certain level of financial literacy. Our children are the leaders of the future and if we do not equip them with the knowledge and skills they need to manage their lives how can we expect them to manage our country?

My first question to any author is what inspired them to create their latest project. For Mr. Loren it was his own teenage daughters. He had wanted to have a conversation with them about money and finances, and his one daughter, Mandy, who was interested in the topic but not in the conversation told him it would be better if he wrote her a letter and she would read it. His reply was, "How about if I write you a book."

While he was serious, his daughter laughed and told him to go ahead. So he began writing. I should back up for a moment. By profession Mr. Loren is a financial advisor with over 20 years experience helping grown adults sort out their financial matters. I asked him if he would agree with the statement that the reason so many kids are financially illiterate is due to the fact that many adults do not know how to effective manage money and that sometimes it is better to not pass on bad habits and let children figure things out on their own. He did agree.

He admitted that when he was a teenager he had no idea what it costs to live. It just wasn't something that was talked about in his house. This is true for many adults, most can look back and unless you came from a poor family, the value of a dollar just wasn't an issue. Can you look back and remember your parents discussing with you the cost of electricity, the grocery bill? Personally I can tell you that while we weren't really taught about the cost of things, we didn't have money… and I learned how to manage money based on the experiences of that poor childhood.

A startling statistic that motivated Mr. Loren even more was a study that was done by Charles Schwab in 2007. Their survey on Teens and Money showed that 90% of teenagers are motivated to learn about money matters like saving, investing and budgeting, however only 20% of teens report that their parents have taught them how to invest and save money.

This sparked a desire in Mr. Loren to reach out to schools and urge them to offer money management courses for all high school students. Teach them something that they are actually going to use, and that they need to be successful. To help spread the word Mr. Loren often holds speaking engagements at the schools so that he can talk to kids and educate them on money matters.

I asked him what advice he could give us as parents to help us educate our kids. He said the first thing you need to do is realize that this recession is a perfect learning opportunity. Realize that in the past we have gone through 31 recessions. Each recession has two things in common, the each had a beginning and an ending. Yes this is a painful time, and this recession is touching everyone. Now is the time to talk to your kids about the economic status of the country and of your home. They not only want to know, they need to know.

Currently our nation is 11.4 trillion dollars in debt. This translates out to $37,000 for each and every American living in the United States. To illustrate the immensity of that debt, Mr. Loren told me that if you had started saving 1 million dollars a day every day for the last 2000 years today you would only have saved three quarters of a trillion dollars. We as a nation and as individuals have made bad money decisions. The key to stopping this vicious cycle is to educate our children.

Start when your children are young. You can start as early as preschool if you talk to them on their level. Some tips that he offers include:

  • Pay them an allowance – even if it is .05 for picking up their crayons, they need to learn the importance of earning money. 
  • Teach them to save – the age old piggybank for many kids is an unheard of relic. For parents that did start having their kids save when they were young… many of them have stopped. Get in the habit of saving. Even if it is a coffee can on the counter where you put all your spare change. Teach them how to put money away.
  • Teach them the difference between need and want.

As children get older you really need to focus on not giving them money, you want them to understand that money is not given to anyone, they have to earn it. There is a sense of pride in earning your own money and being able to pay for what you want with your own money. When your at the store with your child, regardless of their age, and they ask you to give them money for something or they tell you they want a certain item, offer to pay for it if they will do something for you such as washing the car, taking out the trash.

Mr. Loren also advises that you help your child establish a long term relationship with a bank. This means that you go to a bank that you trust and help your child open up a savings and/or checking account. Allow them to get a debit card and then teach them how to use those items. Explain to them the importance of checking your account, keeping track of your spending and explain that banks will charge them more money if they spend more then what they have.

We also need to explain to our kids that they should not share personal information with others, even if they are best friends. The majority of identity theft cases in the US are done by people that you know. Pin numbers, social security numbers and account numbers and logins should be kept private. You need to be proactive. In 2007 there were 15 million cases of identity theft. It takes 600 hours of diligent work to undo the damage on one identity theft case.

Another issue that Mr. Loren feels is important that parents know and children understand is that there are certain skills that need to be learned in order to get a job in this day and age. It is no longer enough to fill out an application or send a resume and hope that you get the job. Unfortunately right now, many kids are competing against their parents for the jobs that are available. This means in order to get the job you need to work harder and perform better than your peers and you need to learn the art of follow up.

I asked Mr. Loren what he felt were three points that he really wanted to drive home to parents today. His very first point is that you shouldn't hide money matters from your kids. He clarifies this with saying that they don't need to know whether or not you can pay your bills on time or the amount of each and every bill. But they can handle being told that times are tough. That everyone in the family has to buckle down right now to get through this rough spot.

The economy will turn around. Personal finances will get better. It is just going through this painful process in the meantime, and you are not doing your kids any favors by not talking to them about it.

His second tip is that you teach them the importance of planning a household budget. I would even go as far as saying that you can help your teen plan their own budget for something that they want. For example if they are looking at getting a new iPod. They need to know the cost, what they have saved, and what money they have coming in, and they need to keep track of the spending habits they have. That $5 here and there at Starbucks adds up pretty quickly.

Finally, instill in them the importance of paying on time. In our house we use deadlines. So when there is a project at school, or I have a project that is due for completion, they all go up on the board. I have listed the days that bills are to be paid by, the due dates for library books and the project deadlines we each have. They need to understand that there is a penalty associated with being late and that it reflects poorly on them.

Mr. Loren agrees that he could talk for a long time on the importance of financial literacy. My friends that is why he has book, one that I highly recommend all parents get. It is his life mission to make sure that all children are educated on money matters. You can contact Mr. Loren on his website  for more information or other tips.
Randy Loren ( has more than two decades of experience in many areas of business and finance, and is currently a financial advisor and a sought-after motivational speaker who educates high school students on the value of financial literacy and sound money and work practices. He is author of a new book, Climbing the Money Mountain: A Young Adult's Guide to Reaching Your Financial Peak (FN Publications, $19.95).

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Pings on The Importance of Teaching Our Children Financial Literacy

June 17, 2009

Comments on The Importance of Teaching Our Children Financial Literacy Leave a Comment

July 2, 2009

Len Penzo @ 8:05 pm #

A great post! :-)

Experience has taught me that teaching kids financial literacy is not easy. This is especially true with younger ones because they really have no concept of the value of a dollar — to test this out just ask any 5-year-old how much they think the house they are living in costs. lol

One extremely effective method I have been successfully using to teach my own young kids financial literacy is money management via a ledger book. By teaching them how to use a ledger, my kids (now ages 12 and 9) have become very adept at how to manage their income (from their allowance and birthday/holiday gifts).

Because they keep accurate ledgers, I now am able to issue them credit if they so desire. Of course, they are charged interest after a grace period, if they don't pay the money back promptly. This has proved to be invaluable in teaching them about the pitfalls of accepting credit.

I also give them monthly bonuses on what they save. If you are interested in the full details on what I did and how I implemented it, check out the following article I wrote on teaching kids how to use a ledger to learn money management skills:

My $0.02 (after taxes)

Len Penzo dot Com

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