Before you became a parent, you undoubtedly imagined all the fun things you'd teach your child -- like how to solve a puzzle, ride a two-wheeler, and bake delicious cupcakes. Chances are you didn't dream of that magical moment when you'd provide his earliest lesson in financial management.
Money is boring. It's private. It's grown-up stuff. There are any number of reasons to dodge the topic. Mostly, though, parents bypass it because we're uncertain of our own fiscal know-how. Survey after survey has shown that Americans are fuzzy about even the basics, such as inflation and interest rates. Many of us enter the workforce woefully unprepared to balance a household budget or to handle the myriad money decisions that fall into our lap, from retirement to complicated mortgage terms to managing a health-insurance plan.
It's not all our fault. Until recently, money education was virtually absent from most school curricula. And even today, only four states -- Missouri, Tennessee, Utah, and Virginia -- require that all students take a personal-finance course before graduating from high school. How can we help our kids avoid the mistakes that have led to millions of defaulted loans since 2008 and contributed to the recession from which we're still recovering?
By talking to them about money ourselves. Trouble is, fewer than one in five parents give themselves a top grade for their understanding of fundamental saving and investing principles, according to a 2010 survey by the investment company T. Rowe Price. "Sometimes we can express our own insecurity by avoiding the subject," says Joline Godfrey, author of Raising Financially Fit Kids.
If the idea of schooling your child in personal finance seems overwhelming, take heart. "Instilling money literacy doesn't require a lot of planning or knowledge," says Laura Levine, executive director of the nonprofit JumpStart Coalition for Personal Financial Literacy. She urges parents to focus on the basics, like comparison shopping and the importance of planning and saving. When your child masters these concepts, she'll know more than many adults. The key is to start young and keep your talks kid-friendly.