What Fourth-Graders “Know” About Money

Financial Literacy Month begins today. What better way to kick things off than with a story from the trenches? This is a guest post from Chett Daniel, who writes about improving your life through personal fitness and personal finance at 5k5k.org.

Every day when I go to work, I have a chance to influence the lives of children. I left a well-paying corporate job nearly two years ago, taking a 50% cut in pay to return to teaching. It's not always hugs and apples, but overall I am happy with my decision to return to the classroom.

Within the education system, most states have incorporated standards that are woven into curriculum, dictating what students are taught in public schools. These state standards and curriculum are then tied directly to standardized tests. There is some latitude within education, but increasingly education is revolving around high-stakes standardized testing.

I am concerned with the focus on raising scores for math, science, and communication art; many other subjects that are critical for developing young minds will be marginalized more and more in the future. Fortunately Missouri is one of only three states that actually require a half credit of personal finance before a high school student graduates.

Economics for 4th graders
Recently I used some of the latitude I have in teaching social studies when completing a unit on economics with two 4th-grade classes (41 students total). One group of students was from my classroom; the other group of students was from a neighboring teacher's class. During the unit, I had an opportunity to gauge the students' knowledge of a few concepts of money and the financial world around them.

To begin the unit, I asked each of the students to answer seven questions on money, advertising, and lifestyle. The results were interesting, particularly their perceptions about “peervertising” (branding and marketing when influenced by peers).

Question 1: What is more important: to grow up to earn a lot of money, or to find a job that you enjoy?

  • 20 students responded “a lot of money”
  • 21 students responded “a job that I enjoy”

I should mention that 14 students from my class said they wanted a job that they enjoy, while only 7 said that they wanted a job that paid a lot of money. I talk a lot about doing well in school so that they can pick the job they want, where they will be happiest; I hope this has influenced their responses.

Question 2: Do you think owning more stuff will make you happier?

  • 12 students responded “no”
  • 20 students responded “a little bit”
  • 9 students responded “a lot” or “gotta have that stuff”

Although this question is related to the one above, most of the students recognized that owning stuff will not make them happier.

Question 3: How does advertising affect you?

  • 4 students responded “none”
  • 10 students responded “a little”
  • 11 students responded “a lot”
  • 16 students responded “give it to me now”

This question attempted to see the affects of advertising and peervertising on their desire to own products.

J.D.'s note: These results are a little surprising. It almost seems that the children have a more realistic attitude toward advertising than adults. Whenever I write about advertising at Get Rich Slowly, I have people write in to say, “Advertising doesn't affect me.” Yeah, right.

 

Question 4: If your friend gets a new object how does this affect you?

  • 9 students responded “none”
  • 13 students responded “a little”
  • 11 students responded “a lot”
  • 8 students responded “give it to me now”

In responding to this question, the students were bold, saying that what others have affects them less than advertising. However, I question the responses to this question, because I see this played out every day in school.

For example, three weeks ago our school installed a pencil and note-pad machine. These machines dispense novelty pencils with holograms, or colorful graphics. I noticed the new machines as I walked in that morning and made a mental note to watch the pencil trend spread.

That same day, one of my students showed the class their new pencil. Within minutes, two students asked permission to go purchase pencils, and the next day five more students came to school with money for pencils.

I explained to the students that the new pencils were just regular pencils: for the cost of two of these pencils they could get a pack of eight at the local dollar store. They replied, “We want those pencils.”

I didn't say any more, and let them purchase the pencils. So I find it interesting that most of the students didn't believe owning more stuff would make them happier, but the majority of students allowed advertising and peervertising to convince them they needed stuff to be happy. (They really are little adults.)

Question 5: What are credit cards used for?
The answers to this question varied to the extent that I don't believe most 9- and 10-year-olds understand the purpose of credit cards. I received a few responses that were, what I felt, accurate depending on the circumstances:

  • “To buy stuff if you don't have the money.”
  • “To pay faster and for emergencies.”
  • “To charge things when you don't have the money, so you can make a payment.”

Question 6: If you earned $500, how much would you save and how much would you spend?

  • 14 students would spend over 50%
  • 8 students would save half and spend half
  • 19 students would save over 50%

Among the 21 students in my class, opinions were divided nearly in thirds: seven said they would spend over 50%, six said they would spend 50% and save 50%, and seven said they would save over 50%.

Question 7: How much money do you expect to earn when you leave school (either high school or college)?
The median household income for the area in which I teach is about $33,000 per year. The students, on average, expected their income to be about $65,000. After mentioning the median income, I didn't elaborate further to make the students see the connection between that number and their parents' incomes.

One of the best things about this age group is they are not afraid to dream and set goals for themselves. One of the hardest things to accomplish is getting them to realize that to reach the goals they set for themselves, they will have to work hard to realize their dreams.

Conclusion
My agenda with this survey had two parts. First, I simply wanted to gain insight into the students' concepts of money and its use in the world around them. Second, I wanted to open a discussion with the students about money and encourage them to start thinking about it.

One thing stood out clearly: kids listen when you talk to them about money. The students from my class gave responses that aligned with values about money and life that I had conveyed to them throughout the year. The problem is we're not talking with them enough, at home or at school.

There are only a few states in the U.S. where teaching personal finance to students is required prior to graduation. The Jump$tart Coalition surveyed high school seniors on personal finance knowledge; they averaged a dismal 65%. Worse, only 50% of the students were aware of the financial costs of paying only the minimums on credit cards.

On my website, I discuss how personal finance has become the last taboo. We've only recently started requiring personal finance for students who are going out and entering the workforce and starting families. Yet, this information is incredibly important.

I encourage each of you who have children or are in a peer/mentor relationship with a young person to share what you have learned about money and life. Don't preach to them and speak as a voice of authority. Instead, teach them. Talk with them about the mistakes you've made and the lessons you've learned. Find everyday examples to show how to handle money correctly. A young person with a good understanding of personal finance will be able to pave his or her own way in life.

J.D.'s note: Canadian financial guru Gail Vaz-Oxlade has posted a survey about kids and money this morning. If you're in Canada, go help her out by answering the questions!

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Baker @ ManVsDebt
Baker @ ManVsDebt
11 years ago

Nice way to kick off the month of April. I particularly enjoyed the fact the the far majority of the class recognized credit cards as a “way to pay when you don’t have the money”. That has both positive and negatives, I guess, but at least they don’t view it the same as actual money. My wife teaches second grade and has had similar discussions with her students about how they view money. Although they are a little less aware than fourth graders, the comments will tell you a lot about our culture as a whole right now. I found… Read more »

Beth @ Smart Family Tips
Beth @ Smart Family Tips
11 years ago

Really interesting post. I’ve been talking with some high school juniors lately about personal finance. Several of them asked why they need to know about it now — essentially, that it’s something they’ll worry about when they actually have “real” money, once they get of school and get “real” jobs. I asked if it wouldn’t be more useful to know how to handle money now so they’ll be prepared. For the most part, they didn’t see the big deal and assumed they’d “figure it out” when necessary. I think this type of response (though granted, it was from a very… Read more »

mary b
mary b
11 years ago

Interesting article, especially since I have a 4th grader!
We discuss finances quite regularly, but he is definitely swayed by advertising, and a little peer pressure.
He does look for sales and asks me for coupons for gum or candy before he buys it!
We talk about saving for big things instead of spending all your money as you get it, and it seems to be sinking in…he is saving for a CAR!!

I plan on asking him the questions in the article!

Jimmy
Jimmy
11 years ago

I would recommend anyone here that wants to help to be part of Junior Achievement. You get matched up with a class at an elementary, middle or high school and teach economics & business to the kids over a 4 week period.

http://www.ja.org

SF_UK
SF_UK
11 years ago

I think it’s great for kids to be taught about finance at school. I wasn’t, but I learned a lot from example at home. My parents are both frugal, occasionally to the point of cheapness, and would teach me things like “I’m working out how much all of these cereals are per kg, so that we know which is best value. It’s usually the biggest pack, but not always”. I was also given the opportunity to learn about budgeting and buying sensibly by being sent to get increasing amounts of stuff at the supermarket, and eventually having my own clothing… Read more »

AD
AD
11 years ago

Great article, Chett! We need more teachers like you, who followed a passion to educate.

I loved how candid the students were about the affect advertising has on them. I think J.D. is right, too, that adults often think they are immune. I TRY to be as immune as possible, but sometimes I have to stop, think for a moment, and realize that the oject of desire is not something I need or even truly want. I don’t always succeed. Especially when the Sur la Table and Anthropologie catalogues come in the mail!

RJ Weiss
RJ Weiss
11 years ago

First…Chett thanks for being a teacher. I highly respect your choice.

A Professor from Dartmouth named Annamaria Lusardi has done some really interesting studies on financial literacy. If anyone is interested more in this topic, I would recommend checking out her site.

http://www.dartmouth.edu/~alusardi/policy.html

Shaun
Shaun
11 years ago

Owning stuff -will- make you a little happier. I understand that in a consumer society one is allowed to disparage wealth with the old adage “there are more important things than money,” however, that doesn’t mean that money and stuff can’t positively impact you.

Aaron
Aaron
11 years ago

I would take a lot of this to mean that kids just know how to give the answers that an adult wants to hear, especially given the example of the pencil machine the teacher mentioned. It is interesting that the children parrot a well known credit card commercial about faster transactions. A also volunteer with Junior Achievement to help teach finance and business. I just finished a series last month, and it is always interesting to see what the children know about money. I applaud this teacher for his efforts.

Camille@TheFinancialWoman.com
11 years ago

As the mother of 2 boys, I enjoyed this article. I admire and thank Chett for making such an important contribution to society.
One of the best ways we have involved our sons in learning about money was to make them “property managers” of our rental fourplex. They learned to earn money at an early age, took pride in their work, learned about spending and saving that hard earned money, and learned about rental property as a bonus.

Michele
Michele
11 years ago

Very cool. Thanks for sharing. It would have been intersting to add in to the question about “If you were given $500” would you spend all of it? I wonder how many of those who said they would spend at least 50% would have answered that they’d spend all of it.

Beth
Beth
11 years ago

I agree that this post is a great way to start off the month 🙂 I enjoyed reading the kids’ insights.

The Personal Finance Playbook
The Personal Finance Playbook
11 years ago

Nice article. I’m glad the kids have such a good teacher;)

Adam @ Checkbook Diaries
Adam @ Checkbook Diaries
11 years ago

Great article. This provides alot of insight to a soon to be father with a growing interest in teaching children how to be financially responsible.

Chris
Chris
11 years ago

Loved this article. I especially like this part, but think it’s misphrased… “…the majority of students allowed advertising and peervertising to convince them they needed stuff to be happy. (They really are little adults.)” – It should say adults are just children grown large. ;-).

I plan to ask my 5th grader these questions and see what she says… should be interesting.

Chett
Chett
11 years ago

@Michele

Of the 14 students who said they would spend over 50% of $500, roughly half said they would spend all of their money (sorry I don’t have the actual numbers with me). As I think back to when I was 10-11 yrs old I would have spent most or all of it. My parents didn’t make or spend a lot of money, but we didn’t talk about it much either.

peachy
peachy
11 years ago

I liked this article, although I have to agree with Aaron (#9).

The kids were probably persuaded by their peers when they were asked the questions. If the cool, well-dressed girl said ‘I’ll save my money’, I wouldn’t be surprised if the shy girl in the back raised her hand along with the cool girl just so she wouldn’t be an outsider.

I know this takes time, and I applaud bringing it up in class, but I would like to see the answers to a one-on-one questionnaire. The children don’t think they’re influenced by advertisement or peers, but they are.

Rooster Teacher
Rooster Teacher
11 years ago

First, thanks for the example of selling pencils at school. It is a wonderful analogy because it is so simple and obvious to the observer. I think that kids are more aware of where their desires for “stuff” come from. They may not know exactly how much TV, advertising, and peers impact their purchases but they seem to be at least conscious of it. Many adults aren’t even at that point. As a teacher in Missouri I am very glad that we have embraced the personal finance curriculum. It is badly needed. We are using Dave Ramsey’s curriculum in our… Read more »

Ragnorok
Ragnorok
11 years ago

Everything that I have learned aobut money has been through my own efforts and education. Nothing from Washington state public school system and nothing from my parents (except by example, and my parents are very fiscally conservative). When I left for college, my dad said “You know how to balance a check book?” I lied and said yes, not wanting to sound dumb. I assumed that if no one had taken the time to teach me, and yet there was some expectation that I should know how, I probably should have ‘picked it up along the way’. So, I fibbed… Read more »

Michele
Michele
11 years ago

Thanks for the answer, Chett. I was wondering because I was curious how many understood the value of saving anything for delayed gratification.

Kate F.
Kate F.
11 years ago

Very interesting. I wonder if part of the reason that some children see this topic as boring or “bunk” as RoosterTeacher notes is because they don’t see how it can be applied. I learned most as a child by having a passbook savings account. But even an in-class assignment assigning an arbitrary currency (marbles? poker chips?) and having them practice working to earn currency and then using it to pay for necessities could work to help them understanding budgeting and loans.

RyansDad
RyansDad
11 years ago

I really enjoyed this post.My son, who will be three next week, already says stuff like “buy that for me Dada”. Kids seem to pick up on the power of money quick. He makes me laugh when I ask him, “Do you have money?”. He will say,”I will get you some from the bank!” Like there is an endless supply there-lol -yeah right! We have already started showing him how to save with the use of a piggy bank. Maybe by the time he is in fourth grade he will be able to understand. Anyway, good luck with the hugs… Read more »

Chett
Chett
11 years ago

Okay the students are gone to recess so I can pop in here again and see how the discussion is going. @ #17 Peachy You are correct students at this age are easily influenced in their answers. When I do question and answers aloud in class I usually make the kids put their heads down so they don’t let others influence their answers. For the purpose of this project I asked all of the questions orally and the students wrote their responses on sheets of paper. Once all of the students were finished I did my own item analysis on… Read more »

Tyler Karaszewski
Tyler Karaszewski
11 years ago

This is good for kids to know, I agree, but I don’t know if it’s any more important than anything else we might be teaching them. People always talk about teaching kids things they’ll need to know “in the real world” to use “when you’re out of school and working”. That’s not what we actually teach kids, though. I remember having a “earth science” class in high school. They teach you about igneous rock, and the water cycle, and other interesting but ultimately not very useful stuff. I read Shakespeare, which I actually liked, but didn’t really help a lot… Read more »

Courtney
Courtney
11 years ago

Wow, these kids seem much more educated than I was when I was in 4th grade (about 15 years ago)!

I didn’t even know what a credit card was. I thought $1,000 a year would be an awesome income. (I also thought houses were free, lol)

85% of my clothing was hand-me-downs, and I only got new toys at Christmas and my birthday. I don’t think I ever bought anything with my allowance (a measly $10 a month). I just hoarded my money and really enjoyed counting it every month.

I guess I’ve been a saver from the get-go.

Krystal
Krystal
11 years ago

I think kids these days are completely out of control, and feel entitled to everything in the world they want. It’s sad really, especially since I work in schools in a pretty affluent area of the US (right outside Microsoft HQ), where this seems magnified. I think the part where the kids say they want to make a lot of money comes from being given everything they want, without having to work for it. They might not realize that their parents may not be happy with their career because it is not discussed, and hey, that income gets them a… Read more »

Jessica
Jessica
11 years ago

I sure wish I had been given some personal finance education when I was in school. Actually, I was given a little, but I wish I had been given more. Not that my education in grammar and long division isn’t important, but I’d say finance education is equally as important. I received years of english and math, but only one summer school class that covered finance, as part of a few math lessons.

Wealth Reader
Wealth Reader
11 years ago

Interesting post – thanks for sharing the survey results. I’m pleasantly surprised at how many of the kids gave wise answers when it came to managing money.

peachy
peachy
11 years ago

Thanks for the additional input Chett. I would be interested in a follow up, and perhaps you can put it in the forums since I’m over there more often than commenting on the main boards.

Keep up the good work. 🙂

Rory
Rory
11 years ago

The biggest influence on understanding the methods of advertising to children came from a TV program I remember that was aired on HBO. It mentioned how many cereal boxes it really takes to ‘COLLECT All 5!’, what the small text at the bottom of the screens means, cartoons as one big advertisement, advertisements masking the true nature the toy, etc. I’m sure it’s out there on the internet, somewhere. I remember being engrossed by it and it really opened me up to being a scrutinizing child rather than following trends. I still desired certain items, but I made sure it… Read more »

hkki
hkki
11 years ago

“a job that I enjoy” nice answer

Doug
Doug
11 years ago

There was no financial education at any of the schools I attended. Until my last required math course in college and it was limited by a student complaining about the curriculm not being followed. I think it helps to get to the students before they have jobs and start spending all their money.

Diana
Diana
11 years ago

I was amazed when talking to a friend recently that her daughter is being taught personal finance. The daughter is about 8 or 9 years old and attends school in Corvallis, OR. They were working on a class project that was to take atleast a month (I beleive longer but my memory is hazy) where they were given an income, have bills, write checks, etc. I believe they also had spending money that they could use at the school. I haven’t heard of any other school that is doing this kind of project. My friend was amazed as well, we… Read more »

Amy
Amy
11 years ago

I teach high school and I mentioned to one of my classes that I don’t own a tv. One student asked, “Then how do you know what’s good?”
It was probably the most honest statement regarding advertising that I’ve ever heard.

Paul
Paul
11 years ago

I teach personal finance to a group of 7th-12th graders. They have responded to a number of concepts:

Understanding microeconomics (the idea that every transaction is mutually beneficial)
Income vs Wealth
Balance sheet vs income statement

And the biggest one: Setting goals.

They get this stuff much better than a lot of people think.

irulan
irulan
11 years ago

@Shaun (#8): It’s not just a trendy cultural artifact. Increased wealth (in the form of income or “stuff”) does not actually correlate with higher levels of happiness when measured over time, except when that increase raises a person out of abject poverty. Danny Kahneman at Princeton has done a lot of research on this- you can get a lot of his publications from his faculty webpage.

DDFD at DivorcedDadFrugalDad
DDFD at DivorcedDadFrugalDad
11 years ago

Interesting post– out of the mouths of babes . . .

Mercy Mei
Mercy Mei
11 years ago

Great post!

Kids can easily understand the concept of frugality when they see their parents practice it without hypocrisy. If they see Mom and Dad clipping coupons and NOT being materialistic, they’re inoculated against their friends’ materialism.

I’ve taken it upon myself to give my 2 girls allowances that include their cellphones (they’re 12 and 14). They get a certain number of minutes each month and that’s it. If they go over, they can get an advance from the next month’s allotment, but that’s it.

I use a Net10 prepaid phone for this, which is very easy and convenient, too.

Jessica
Jessica
11 years ago

Ok when I was in elem. school we got a pencil machine similiar to the one in the article. I was in first or second grade at the time. Having pencils became so trendy that kids would line up down the hall and around the corner to get pencils. I think I was getting one every day trying to collect the cool ones. Fast forward 16 years. I bought enough pencils that SINGLE year of 1st-2nd grade to last me all the way through grades 2-12… And through four years of college as well. I STILL have all of those… Read more »

Heather
Heather
11 years ago

Re: Kids’ desire to “make a lot of money” being a result of entitlement and being given everything they want … it’s not that simple. I was raised quite poor in an atmosphere of constant anxiety about money, wore Goodwill clothes my classmates recognized as their own cast-offs, and swore to myself early on that I would be better off someday. When anyone asked me what was important to me in life I would say “making a lot of money!” Wasn’t taught how to get there at all, though — money was a taboo topic (as it is, in my… Read more »

NickK
NickK
11 years ago

JD, My employer, a bank, will this year celebrate 25 years of a program that sends our employees to a local elementary school to teach the kids about things related to finance, banks and money. I’ve been involved in the program several years now. I’ve taught lessons on how banks work and how the stock market works. In all the years I’ve taught, never has the response been so great nor the level of interest been so high as this year. In the past, maybe 50% of the kids knew what the stock market was – or had even heard… Read more »

Chris
Chris
11 years ago

The best way to teach kids about savings accounts is by opening a savings account for them at a bank (http://allfinancialmatters.com/2009/03/31/lessons-learned-saving-on-your-child%E2%80%99s-school-lunch/comment-page-1/#comment-412202) If the kids can learn to save early enough may be our national debt will someday be paid off?

DIana Gifford
DIana Gifford
11 years ago

Check out the Junior Achievement website at http://www.ja.org
They are the the largest non-profit educational organization in the world, bringing units of study focused on financial literacy into classrooms K-12. These programs are provided at no charge to the schools and align with state standards. Every state has an active Junior Achievement program and volunteers are sought to be trained and take these valuable programs into our schools.

partgypsy
partgypsy
11 years ago

Kids are smarter than you think. My daughter was 5 years old at the time and she knew we were paying off our car. She was our voice of conscience when fun things came up, she would be the one who would say no “let’s use that money for the car instead.” If she asked and said she really wanted something in a store I would tell her you can get it but the money comes out of your piggybank. 80% of the time she would decide not to get it. She gets marbles for good behavior and when the… Read more »

Gail
Gail
11 years ago

Thanks JD. Hugs. g

Ari Lestariono
Ari Lestariono
11 years ago

Fourth grader only knows how to buy ice cream and candy in supermarket.But yes they have deep feeling about their parents income.

Katie
Katie
11 years ago

In my 10 year olds 4th grade classroom, they are issued “classroom” money for certain projects or events. Every two weeks, they have a class store, where everything is assigned a dollar amount. Credit is NOT allowed. While I applaud the teachers attempt to teach children about “earning” money to buy things they “want”, nothing is taught in the way of saving money – unless it is saving for a big ticket item. I suppose that is age appropriate, however, as children do not really understand the long term effects of choices. I recently drew a line in the sand… Read more »

Ashish
Ashish
11 years ago

In India it is traditional of sort to save as much as possible and it had become a culture. However with changing times, overdose of adverts on TV/billboards/magazines/newspaper people are forgetting the saving habit. it is easy money these days from jobs and via loans that is making everyone flaunting money anywhere you go. Kids don’t have formal/informal finance education either at school or home. Indian government is least bothered at improving this. They just think maths/science is enough to make someone competitive to survive in this world. My son thinks ATM is the never ending source of money and… Read more »

plonkee
plonkee
11 years ago

@Tyler (#24):
I completely agree. Actually a lot of stuff about the *real world* is best taught in the real world, accepting the school is in many ways a suspension of reality for good reason. I think parents and other interested adults probably do a better job of teaching about personal finance, alcohol use, or sex, in the sense that kids learn stuff about those topics although it is often the wrong stuff.

Ari Lestariono
Ari Lestariono
11 years ago

Some family in my country they made their own schooling system for their children and family to maintain intact and pure as to learn directly to life experience, before their grandfathers are the founding father of our nation and was very smart.

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