“Mama, can we get that Star Wars Lego set?” my five-year-old son, Will, asked as I tried to walk past the toy aisle quickly. When I told him we didn’t have enough money to get the nearly $300 set, he shot back:
“But you can just go get some at the bank!”
I laughed at his quick solution, of course, but it made me realize that he’s getting old enough to learn some basic financial literacy skills. However, truthfully, this is one area of his education I hadn’t given much thought to.
And I’m not alone: many parents gloss over or ignore completely this incredibly important topic. Only about 25% of recent survey respondents said their parents made them feel “very prepared” for the financial reality of living on their own.
“Most parents are starting from a place of not feeling ready to talk about money,” says Yash Paliwal, founder of Financy, a new basic financial literacy app for families.
That could be because many adults don’t have a great grasp of basic financial literacy themselves.
The Personal Finance Index, an annual survey that examines basic financial literacy among US adults, has consistently reported very low levels of financial literacy since its inaugural report in 2017.
This illiteracy has real-world consequences: a recent report found that, on average, financial illiteracy cost the survey respondents almost $2,000 in 2022 alone. These findings aren’t surprising given that high schools don’t teach basic financial literacy: just 17% of US adults said they took a basic financial literacy class before graduating.
On average, financial illiteracy cost Americans almost $2,000 in 2022 alone
“A lot of people come out of [school] without having been taught financial literacy in any detail,” says certified financial planner Denis Poljak, a partner with the Poljak Group Wealth Management at Steward Partners in Shreveport, Louisiana.
“They end up just … learning from their mistakes.”
But some mistakes, like taking on too much bad debt, can have lifelong consequences. Basic financial literacy is too important to leave up to trial and error.
“It is a problem that is getting worse because there’s all these new products being added, like buy-now-pay-later cryptocurrency, and people are less aware than ever before,” says Paliwal.
If parents want to set their kids up for financial success later in life, they’ve got to make sure to teach them basic financial literacy at an early age. Thankfully, financial education companies like Financy are making it easier — and more fun — to learn important money skills.
Financy gamifies basic financial literacy
For many parents, teaching their kids about finance means learning these concepts right along with them.
“We are hearing from many parents who say, I want to teach my kid about inflation but I don’t know why inflation happens myself. Well, that’s fair. It’s a very complicated macro concept,” says Paliwal.
“And that’s the thing that we’re solving: helping families fill the gap of teaching their kids about money.”
We are hearing from many parents who say, I want to teach my kid about inflation but I don’t know why inflation happens myself. Well, that’s fair. It’s a very complicated macro concept.
Yash Paliwal, founder of Financy
Financy was founded in 2022 as a way to make learning basic financial literacy more flexible and engaging for families. Many of the app’s users are families that choose to educate their kids outside of the traditional classroom setting.
The app turns basic financial literacy education into a game that resembles Minecraft where players can manage their worlds. However, instead of mining for gems, Financy players are given an island to manage. To manage the island the players need to do things like earn resources like seeds to plant trees which they can harvest later to build things, and sell items to make money.
The players earn money by completing lessons on different basic financial literacy topics. There are two versions of the game: one for kids ages five to eight and a more advanced version. The younger version includes topics like “What is money?,” “Goods and services”, and “What is a bank?” while the advanced version goes into topics such as investing, budgeting, and credit cards. Parents are notified via email when their child completes a lesson and are given suggestions on how to reinforce the concepts in everyday life.
Family values shape our money habits
Most of Financy’s users are families that educate their children outside of the traditional classroom, such as traditional homeschoolers, worldschoolers, or hybrid schoolers.
Amber Wright in Tallahassee knew she wanted to homeschool to give her boys an education grounded in the real world. Basic financial literacy is a huge part of their education.
“We focus on stuff that’s going to affect them day to day. They have their own bank accounts and they’re learning budgeting this year,” says Wright, adding that she emphasizes the importance of saving and being conservative with money so that her kids aren’t in debt by the time they are 20.
The game is in its infancy but Paliwal and his team have big plans for later versions, especially when it comes to giving parents like Wright more control over the financial values they instill in their children.
“Financial education is inherently very different than math, science, geography. Your family’s values do not change your preferences around whether two plus two is four. But your family values and your cultural societal preferences will change how much you value giving, how much you value saving, how comfortable you may be with exploring a credit card and using something like that,” says Paliwal.
“Each family’s got a different temperament. I think that’s a big part of why it’s challenging to teach financial literacy.”
Parents will be able to customize the game in a way that will appeal to their family values.
To give parents more options over which values they emphasize in the game, Paliwal and his team are working on allowing users to customize the game in a way that will appeal to their family values.
Currently, they are working on extensive game customizations, including a values/faith-based curriculum and the option to add or remove various topics, such as entrepreneurship.
“That’s one way we want to give parents optionality and let them choose which topics they may or may not want to introduce to their child,” says Paliwal, adding that many families of faith want to emphasize piety around money and giving to those in need.
Money talk
While a game like Financy is helpful when a structured approach to learning is needed, it’s not a substitute for everyday money conversations. Talking about money openly and often is one of the best ways to establish basic financial literacy at a young age.
Family culture is a huge factor that shapes a child’s relationship with money “because our kids see and do everything that we do,” says financial expert Jen Hemphill.
Many parents may not feel the need to include young children in their money conversations, but that’s doing them a disservice. The earlier they are included, the more likely they are to be comfortable with money as they grow older.
Talking about money openly and often is one of the best ways to establish basic financial literacy at a young age.
These conversations don’t have to be super serious or scary, Hemphill tells NPR. She suggests bringing up money in casual conversations to make it less scary. Parents can also include their kids in decisions on the family’s everyday spending habits. For example, you could ask your 5-year-old to choose which bread to buy at the grocery store, then talk to them about their reasoning.
Then, says Hemphill, it’s important to set aside a more formal time once a month to talk about the family’s spending habits, especially if the children are a little older. This can be a place where everyone contributes their thoughts about the family’s financial goals.
When parents can comfortably and confidently explain their money values and rationale to the kids, “it leads to children being more comfortable around their own situation and understanding what their options are,” says Paliwal.
This confidence and understanding will have positive benefits for kids beyond just their bank account.
“The long-term impact can be very positive for kids, beyond just the money side. You can explore early career paths and entrepreneurship, gain independence, and learn meaningful skills.”
This article is sponsored by Financy. Click here to get Financy for your family.