Beyond piggy banks: teaching young people to manage money
When high schoolers are asked where they learn about managing money, almost 90% say, “at
home.” Yet Northwestern Mutual’s 2003 Kids & Money study, a part of the company’s Perfectcents
financial literacy program, found 44% of parents admitted they are not good financial role models for
True, almost every family starts a child out with a piggy bank. However, the Perfectcents Kids &
Money research shows that the majority of parents avoid the more complex conversations about
budgets, debt, credit, investing, loans, and how the family handles money. While half of parents
surveyed talked about budgeting for future purchases, the other topics fell in the 20% and 30%
The numbers aren’t high. Why? Parents are hoping that the schools will teach children to manage
money. It’s not going to happen. Schools caught in their own budget crunches are stripping away all
but the most basic courses.
How much do our youth know?
Do young people need to learn about money? The answer is yes. Jump$tart Coalition for Personal
Financial Literacy has tested the nation’s 12th graders on the basics of personal finance every two
years since 1997. Each year, participants have averaged a failing grade — from 57.3% in 1997 to a
low of 50.2% in 2002. In 2004, for the first time, scores rose to an average of 52.3%. Only 6.1% of
students taking the test scored a grade of C or better.
Two telling statistics from the Jump$tart test:
48% of students didn’t understand compound interest, despite the high number of savings
accounts among children.
35% did not understand the disadvantage of paying only the minimum amount on a credit
card balance. Yet 11% already had their own credit card and another 16% use their parents’
The most recent figures available by Nellie Mae report the average number of credit cards per
college student in 2001 was 4.25.
Now contrast young people’s knowledge with their spending.
Teen Research Unlimited (TRU) reports spending among 12-19 year olds averaged $103 per week
in 2003. It’s a figure, according to TRU, that has been growing larger each year.
The same is certainly true of spending among children, ages 4-12. Here are the findings of a
Packaged Facts study, The U.S. Kids Market, 2002:
1984 $4.2 billion
1994 $17.1 billion
2002 $40 billion
2006 $51.8 billion (projected)
Out of control?
With such spending, where do children, teens, and young adults find the discipline to use money for
other reasons: saving for the future, investing for the long-term, donating?
If children grow up thinking that money is only for spending, what will happen to them as young
adults — when all of their money can no longer be spent purely for entertainment, clothes, music,
and the latest in electronic gadgets? When and how do we teach that money has other uses and that
people must look toward the future as well as live in the moment?
Help for families
The Northwestern Mutual Foundation has developed a website to help start and direct the
The website contains tips for parents to transform everyday occurrences into “teachable moments”
on how to earn, track, spend, save, borrow, invest, and donate. The site shows younger children that
there are other things to do with money besides spend it. Older children can even learn about
salaries and the rudiments of interest rates and investing.
There are activities children can try by themselves or with a parent: handling credit, living in an
apartment, and testing their shopping savvy. There are downloadable Perfectcents newsletters,
many with family activities and games.
Being financially literate will play as a large a role in our children’s lives as knowing how to read and
write, add and subtract. We invite you to use www.themint.org to help your family with these
important conversations about money. Contact your Northwestern Mutual Financial Representative
to learn about nurturing money-smart children and about planning to safeguard their future.