Molly Carter
In modern society, cash is no longer king.
With debit cards in every wallet, companies paying with direct deposit, and people taking advantage of online banking, it’s no wonder kids today don’t have a clear understanding of money.
With our current digital economy, many people no longer carry cash, opting to use debit or credit cards instead. That means the current generation of children see less and less physical cash, making money seem like an almost abstract concept. And with most parents not sharing much about finances with their kids to protect them from money woes, children are learning less and less of the information they need to prepare for life as a responsible and productive adult.
Here are seven common money myths kids believe and what teachers can do to correct them.
Myth #1: Money Is Only Used to Buy Stuff
Ask a child what money is used for, and he’ll tell you it’s for buying stuff. While that’s true, most children see people spending money only on things like food, gas, and clothing. When it comes to things like electricity, water, heat, internet, and phone service, a surprising amount of children think these things are free. And if a kid has never seen his parents going through the process of buying a house or car, he may not realize the extent of money these things cost.
Teacher Fix: When teaching money lessons in primary school, do more than just teach kids to count and buy trucks and dolls. Give examples of other things money is used for and how much things like utilities cost. Have older students detail what it costs to get an apartment to help them understand the bills they’ll someday have.
Myth #2: There Is No Budget
Many kids don’t know that money has to be budgeted. Families on television don’t have to wait until payday to buy new shoes or worry about how to pay the fuel bill, but those in real life do. Because of this omission from what kids perceive, there’s a lack of understanding that each person only has a limited amount of funds that must be used to cover all his or her expenses.
Teacher Fix: Kids off all ages should be exposed to budgets and how to use them in the classroom. For young children, pretend grocery shopping gives teachers the opportunity to teach how to make decisions on what to buy, while those in high school are old enough to understand full household budgets.
Myth #3: Plastic Money Is Endless
To kids, debit and credit cards must seem like magic. It’s a small piece of plastic that’s used to buy things and this same card can be put in an ATM to get money. And that’s all they see. Children don’t know that mom or dad’s paycheck gets deposited and that the card is attached to a bank account. They only know that the card can seemingly be used whenever to get whatever they want, so it’s easy to understand how kids gain this misperception.
Teacher Fix: Give lessons on debit cards, checkbook balancing, FICO scores, and good credit management. Explain how to build positive credit, the consequences of making bad credit choices, and how credit scores impact buying decisions.
Myth #4: There’s No Reason to Save for Retirement
Many children don’t understand that it’s an individual’s responsibility to save for retirement. Many children think things are just taken care of and that once a home is paid for and someone has what they need, there’s no longer a need to have money, especially when the person in question is older.
Teacher Fix: Introduce school-aged children to different types of retirement savings such as pensions, IRAs, and 401(k)s. With high school students, discuss social security and how it works, as well as how much money is needed for retirement and the best ways to save.
Myth #5: Taxes Must Be Paid
When a child sees a toy that costs $29.95, they assume they only need $29.95 to buy it. Taxes are a hard concept for children of all ages to understand, from the seven-year old wanting to buy a new game to the teenager who gets her first paycheck and realizes there’s an employment tax.
Teacher Fix: To help kids gain a better understanding of taxes, teachers should incorporate lessons on different types of taxes and what this money is used for. With high schoolers, teachers can have mock tax forms that need to be completed every April to teach students how they’re done.
Myth #6: Things Are Affordable
When it comes to how much things cost, most kids are clueless. Children in primary school may think a gallon of milk costs $20 and that a house only costs $100. Even as they age and the concept of money grows, many kids don’t fully understand the cost of the things from their Xbox 360 to a trip to Disney.
Teacher Fix: Get a class piggy bank and have children save for a specific goal, like a class party. Saving their own money and determining the cost of what the class purchases gives kids a more realistic view and appreciation of what is affordable and what’s not.
Myth #7: Money Can Buy Happiness
For children who’ve witnessed their parents struggle financially, and for many of those who haven’t, it’s easy to believe that money solves problems and buys happiness. Kids think that if only they could buy whatever they wanted, everything would be perfect. While research shows that money can make a difference in happiness, it only works to a certain extent. Once a person makes enough money that there are no issues paying bills, the amount of money she makes no longer has an impact on happiness. For most people, that magic number is around $75,000 a year.
Teacher Fix: Instead of focusing happiness and self-worth around things, show kids how to find happiness in other areas of their lives. Teach how things like mindfulness and volunteering time to help others increases these feelings more so than any dollar bill ever will.
