Teaching Kids Financial Literacy: Tips for Parents

Jessica Quindlen: [00:00:00] Welcome back to the Sound Cents Podcast. I'm Jessica Quindlen. Today we're discussing teaching financial literacy at every age. I have two fantastic guests with me today. Sara McKinney, our VP of Legal and Regulatory Compliance. Welcome back, Sara.

Sara McKinney: Hi, thanks for having me.

Jessica Quindlen: Yes. And we have someone new today. Marnie Gerkhardt, our Director of Learning Innovation. Hello, Marnie.

Marnie Gerkhardt: Hi, thanks so much for the invite.

Jessica Quindlen: Yes. So really quick, all three of us are parents. Can we just quick dive into our kids and their ages? I'm a parent. I have Lily. She is four and a half. She'll be five next month. How about you, Sara?

Sara McKinney: I have a 17-year-old daughter, Emma, and a 10-year-old daughter, Olive.

Jessica Quindlen: Cute. Marnie.

Marnie Gerkhardt: I have a three-and-a-half-year-old daughter, Sutton, and a, let's just call him five-month-old son. He was born a little early, so he's got an adjusted age and an actual age, but he acts like a five-month-old, CJ.

Jessica Quindlen: I love it. So cute. Little babies. All right, let's dive right in. Let's just start with sort of young kids around ages three to seven. What are some ways that we [00:01:00] can teach financial literacy for them?

Sara McKinney: I think starting a savings account or putting money in a piggy bank. Anytime we have loose change, we'll give it to Olive when she was little and she has several piggy banks. And then we actually brought them to Ent to the coin counter and she was able to see how much that generated. So that's worked for us.

Jessica Quindlen: I love that. Yeah, we do a lot of coins and bill counting especially smaller bells. Lily gets very excited paying for things.

Do you have anything? I know yours are still on the younger side.

Marnie Gerkhardt: Yeah, just venturing into that fun understanding of that, not everything in life is free and able to be brought home when we go to the store. I'll say two things. The first is going to the store and saying no. Right? Like making them recognize…

Sara McKinney: Wait, what?

Marnie Gerkhardt: If my daughter goes to the store with Sara, the word “no” does not exist.

Sara McKinney: I'm a bad influence.

Marnie Gerkhardt: But learning to say no. If she gets to bring one thing home, she knows she has to give up [00:02:00] something for another thing is something we've tried to instill. Also being purposeful with the toys that we do bring home.

And then additionally, my best friend just visited from out of town and gave her this really cool little ice cream shop. It's got all these different kinds of ice creams and all these different kinds of toppings and a little cone and a little cup. And it came with some dollars, so we're trying really hard to make sure that when we get our ice cream, we pay her a dollar or two with her fake money.

Jessica Quindlen: Yeah. Things aren't free. I love that. All right, let's move up a little bit. You know, building on these basics, sort of 8- to 12-year-old range, what are some tools we can use there?

Sara McKinney: I think the first one is starting an allowance for little chores. And if they don't do the chore, they don't get the allowance.

Marnie Gerkhardt: Can't wait for that age.

Jessica Quindlen: I know, right? Middle school.

Sara McKinney: My kids often don't get the allowance because they don't do the chores.

Jessica Quindlen: Do you have like a chore chart or is it just do a chore?

Sara McKinney: Just do your chores. I'm not organized enough to have a chore chart.

Marnie Gerkhardt: If Jess were doing that, she would want a checklist, some [00:03:00] stickers.

Jessica Quindlen: Color coded. Yep. You know me so well, Marnie. That's very true.

Sara McKinney: That would probably work better.

And then, when we started the piggy bank earlier, continue that with my 10-year-old. Now she plays a game with my parents where every time she sees a wild animal, they give her a dollar. So, she counts up her money. It started when she was really little to keep her awake in the car.

Jessica Quindlen: Oh, I see.

Sara McKinney: She's about to fall asleep. But then she has to save that money. And when I tell her she has to spend it if she wants a toy at the store and I'm like, “Okay, you can have that, but we're going to come back and you're going to bring your own money,” she cries and then doesn't want the toy anymore. And then tells me that she's saving that money for college. So we've really drilled savings into her head.

Jessica Quindlen: That's fantastic. She's 10.

Sara McKinney: She's 10.

Jessica Quindlen: Good on her. Do your parents live in the woods? Or just wild animals on the road.

Sara McKinney: My parents live in Colorado Springs.

Jessica Quindlen: Oh, okay.

Marnie Gerkhardt: What about the zoo? Do they ever take a trip?

Sara McKinney: No, it doesn't count. There are rules to this game. It has to be a wild animal.

Jessica Quindlen: Because if I was her, I'd be like, let's go to the zoo.

Sara McKinney: No, it has to be a wild [00:04:00] animal. It can't be a bird. Our biggest one..she's capped out at, I don't know, $10 a day, so she can't go past that. And she doesn't get it every day. But our biggest one, where we just got the $10, (because now the whole family plays, but only Olive gets the money) is we were coming home from Estes and saw a deer cross right in front of our car being chased by a mountain lion. So, we got the $10 for that.

Jessica Quindlen: That's amazing. Do you have to send photographic evidence or do your parents just trust?

Sara McKinney: They trust us.

Jessica Quindlen: A deer chased by a mountain. That's really cool and terrifying. This was on the highway?

Sara McKinney: Yeah. Right in front of our car. What is that? 34? Highway 34 goes up there, going to Estes. Okay. There you go. Really went off on a tangent there. Sorry.

Jessica Quindlen: No, that's fine. I love that. I think it's finding those creative ways too, to make it fun for them so it's not…I mean, chores are important, but sometimes it's just cute, fun activities you can do, but then still making them pay for things, buy their own toys. And then they can make that decision. I love that she's saving for college.

Sara McKinney: Yeah, me too. And then the other one that has really taught her a lot, [00:05:00] Monopoly. Back when I was little, it was just fake money. Now it's a credit card. And it's a little fake credit card and you can tap it and, you know, you're like, I'm on, Park Place. And I have to pay someone. So you put it in and it deletes from your credit card, and then you can have a negative or positive amount, so it kind of teaches them that credit example.

Jessica Quindlen: Interesting. I had no idea. I haven't played Monopoly in a very long time.

Marnie Gerkhardt: It never ends.

Jessica Quindlen: Well, that too. It's also a 27 hour game.

Sara McKinney: It's like kids Monopoly. It ends.

Jessica Quindlen: Interesting. And so, it also adds the money?

Sara McKinney: Yeah, so you can kind of see how credit works. Like you don't need to have the cash.

Jessica Quindlen: Which I think is great. I mean, I personally rarely have cash unless I know I need to.

Marnie Gerkhardt: Right. And it adds a totally different dynamic to saving and spending, right?

Because it is not in front of you and tangible the way it used to be. So, this is another challenge we have as parents growing up and trying to teach our kids how to spend as purposefully and thoughtfully as possible.

Jessica Quindlen: [00:06:00] Absolutely. Especially when you're right, you don't physically have the money. I mean, that's something as a 33-year-old adult that I struggle with sometimes because it's not there but it's in the ether.

I love that. All right, so let's move up to teenagers the most fun time. What are we doing with our teens?

Sara McKinney: So, I can jump in on that one too because I have one. She does have a job and she has to put half of every paycheck in a savings account and I'm joint on it so I can look at it and see that she's doing it.

So, she has done that. And then Money Insight has really been beneficial because I've been able to walk through and show her like, “Okay, look how much you're spending.” It's typically fast food with her. Look how much you're spending on fast food.

And she has cut her spending a little bit there to be more purposeful about how she spends her money. So that's been nice before she flies the coop to teach her a little bit on, you know, money doesn't grow on trees, right? You have to spend this and look, there's a tool where you can see where you're spending it. [00:07:00]

Jessica Quindlen: I love that. Marnie, earlier before we were recording, you talked about transparency and vulnerability. Can you dive into that?

Marnie Gerkhardt: I was just sharing that I think it's about creating awareness. And in order to create that sense of awareness, you have to be vulnerable and transparent as parents about where your current spending lies. Sharing that and ensuring that there are tools and systems put in place so that way you can help your children identify where their current spending is, where their current saving is, so they can start to build those healthy habits as soon as possible.

Sara McKinney: And I think, too, to add to that I've been pretty open and honest, (my husband and I both have) about the money mistakes we've made in the past, so learn from our mistakes.

Jessica Quindlen: Absolutely. So, you don't do it. But also know that it can happen, and you can recover from it at the same time.

So, Marnie, you have done some really interesting work previously around education and paying for education. Can you elaborate on all that work? That's both for kids knowledge and also parents knowledge prepping for school, potentially even private [00:08:00] education.

Marnie Gerkhardt: Yeah, in my previous job, I worked at a research institute for credit unions. And I got to work on the fun side where we put that research into action at the Filene Research Institute. And I got to take problems and solve them. And one of the problems…

Sara McKinney: If you've got a problem, yo, Marnie, will solve it.

Marnie Gerkhardt: I definitely did that for years. But we tried to figure out how we could get kids to maximize their college investment. Because we all knew that, you know, you see the tuition at a school and it's $3,750 a semester. And you're like, “Oh, that's affordable. I can do that.” But you're not thinking about where you're going to live, what the books are going to cost, how you're going to get around, what food's going to be.

And so this team built this dynamic calculator that said, “Hi, I'm Sara. I live in Colorado. I want to go to school in Washington and I want to go to this school in Washington.” And it would calculate your out-of-state tuition and then it would say, “Okay, [00:09:00] where are you going to live? Are you going to live in the dorms? Are you going to live off campus? Are you going to live with a family member?” And it asks you all these questions to think about do you have any funds saved right now that you're going to put towards your college education? What are you going to do about books? Are you going to rent them? Are you going to buy them?

What about food? Are you going to get on a plan or are you going to, you know, eat at Uncle Joe's house? All of the things that go into the true cost of your education and it would spit out an anticipated monthly payment amount.

It would spit out and say, “Okay school's going to be $300 a month after you graduate.” That's how much you're going to owe on these loans you're taking out, on your student loans. So, you could play with the numbers to say, “I owe $1,500 a month,” or “I owe $30 a month.”

I saw a couple of really fascinating things happen because we brought this into high schools and had kids do this in class. And the first thing I saw was this girl sitting next to her friend [00:10:00] and she goes, “Well, it looks like I'm going to be living at uncle so-and-so's house. I can't afford to live there.”

We also had really hoped that parents would do it with their kids so they could say, “Hey, that's how much my mortgage is. That's how much our house payment is.” So that students could think about what they would have to maybe trade off in the future for that and start to have some deeper conversations.

Jessica Quindlen: Absolutely. Because when you graduate, you're not just paying student loans. Then you're an adult, and fun fact, there are bills for days.

Marnie Gerkhardt: I mean, think about how many people we know that can't buy homes today because they have crazy student loan payments. So we saw that and we also saw it starting to have those vulnerable conversations that we're all afraid to talk about, right?

Like most people don't want to talk about what their financial situation is. We got to see kids talking to each other in a way that normally doesn't happen without a tool like this. It gave me hope. It gave me hope that we can really solve problems and build tools to help people make smarter financial decisions.

Sara McKinney: As the parent of someone who has an almost college-aged kid, does this tool still exist in the world?

Marnie Gerkhardt: I'm going to do some research and [00:11:00] find out. I did not get around to reaching out to the company that built this, but I wonder if we could get it.

Sara McKinney: That's great.

Jessica Quindlen: That is great. And if we can, we'll share that for sure. But this sounds fantastic. And I agree with you. I mean, I certainly was not thinking about that when I was 17, 18. All of the costs of college and then what that means after the fact.

Marnie Gerkhardt: Yeah, and we also wanted to solve the problem of, “Okay, I'm going to go to this crazy expensive school and then I'm going to come out.” And no offense to any of the brilliant human beings in the world that teach for a living, because thank you for doing that very important work to build the future generations, but they don't get paid a whole lot.

And so how can you also factor in what you want to do afterwards and that salary with how much you're going to be taking.

Sara McKinney: I was just going to say, is that part of it too? Because my daughter does want to teach and just seeing, “Okay, I have to pay $1,500 a month,” isn't going to tell her much. But if she says, “I have to pay $1,500 a month and I earned $2,000 a month,” or whatever.

You know what I mean? [00:12:00] Putting the two together to make sense of reasons.

Marnie Gerkhardt: Is it reasonable for you to go to some prestigious school and then come out?

Jessica Quindlen: Right. But yeah, I think it's weighing that. How much will going to this prestigious school work in my favor? And I think there's also that conversation we were kind of talking about this earlier, like Bachelor’s versus Master’s, depending on certain careers.

Sometimes Bachelor’s is…I don't know…They're important, but it can be...I mean, I have a theater degree. I'm not using that now. You have a philosophy degree? You're not using that. But us having that, frankly, piece of paper that we have a Bachelor's does help us. So, would it have mattered if we went to Harvard or if we went to a state school versus like sometimes Master's programs?

That's where, and I'm not an expert in that, but I think those conversations are also valuable depending on what field you want to go to, of course.

Sara McKinney: But I could even see that tool working for people who choose not to go and get advance education in college and just work right out of high school. Like, this is what I'm going to earn, these are the bills I'm going to have to pay. How does that look?

And then, you know, you teach them that you have to have an emergency savings in case your [00:13:00] tire goes flat or something. It's all of those things. Whether someone chooses to go to school or not, they are really important to learn. You can't just kick them out and be like, good luck.

Jessica Quindlen: No, absolutely. we have bills and we have to adult whether we like it or not. Whether we go to college and it happens afterwards, or whether it happens right at 18. I think we have to have these conversations with our kids. You know, I didn't have as many conversations as I would have liked but I certainly was more educated than some other people that I know. And now, it's kind of all up to parents and families.

Sara McKinney: I didn't, hence the credit card.

Jessica Quindlen: Yes. We have discussed your credit card story. And I have my student loans. I definitely overspent. I took out way more than I needed to because I wanted to have fun and pay for things and I was busy not working and then they come back to get you.

Well, anything else we want to add about kids and finances?

Marnie Gerkhardt: I just think the theme and the common thread that we discussed was finding the tool, finding the opportunity to have the conversation. At the end of the day, that's what it's about. Finding something that sparks the dialogue that [00:14:00] initiates that learning. And then making sure it doesn't fall off your plate, making sure you continue to talk to kids about it because they're going to have to deal with it no matter what. It is an inevitable part of life.

Sara McKinney: Absolutely. And I think to your point, you know, kind of the questions you asked. You can't start too early, right? It's not going to hurt. It's a lifelong thing.

Jessica Quindlen: It is. And again, it's not going anywhere. It's not something you get over, right? It's not like you turn 50 and you're like, “Oh, no more money.” That's not how that works. Money and bills are always important.

Marnie Gerkhardt: Scholarships and grants are real.

Jessica Quindlen: Right. Yes, that too. Well, that brings us to the end of our show. Marnie, Sara, thanks so much for being here. It was great to have you.

Sara McKinney & Marnie Gerkhardt: Thanks for having us. Yes. Thank you.

Jessica Quindlen: Thank you for listening to Sound Cents from Ent Credit Union. Be sure to follow our podcast as well as rate and review us. I'm Jessica Quindlen. I will see you next week. Same time, same place.