Back to School with Personal Finance

The beginning of a new school year is an opportunity to introduce children to every day financial concepts in a comfortable way. Too often, kids and young adults are exposed to issues around money in ways that are intimidating or negative, even though understanding and managing money is a normal part of a satisfying life.

Back to school supplies are a financial commitment that can be introduced as part of personal financial management. Based on your research or experience with all the things you’ll be buying, set a comfortable budget amount. If your child wants to pick “way cool” notebooks that cost more than average, then perhaps the backpack will be the economy version. Budgeting is particularly effective with back to school clothes. With clothes – or any of the things covered by a budget – you can set some requirements. For instance, you might decide that the clothing needs to include a nice outfit for special occasions and clothing can’t violate the school dress code. A clothing budget gives latitude for your child to make some decisions. Buy fewer clothes that are higher cost or lots of lower priced items that can mix and match. These budgeting opportunities aren’t about teaching your child to limit spending. It’s about the child learning to make choices and live with the outcome of those decisions. The tone in discussing the budget should be positive and about the opportunity to have some control.

Buying school supplies is also a chance to discuss relative value. That’s a concept that allows comparing an expense with other expenses, or the perspective of how long it takes to earn enough to cover a certain expense. Let’s say that your daughter earns about $10 a week doing chores and the backpack she wants costs about $15. You can point out that the backpack would take about a week and a half to pay for. If the back to school budget you’ve established is $30, you can put the backpack purchase in perspective as taking half of the back to school budget.

High school is a good time to discuss the positive impact that higher education can have on earnings. Data from the Department of Labor reflect that the earnings of people increase with their level of education from those lacking a high school diploma up to those with a professional degree. Based on the lifetime impact that the right higher education can have, it’s also good to discuss the cost of training in a trade or acquiring a college education.

There is frequent concern about the lack of education on personal finance in public schools. It’s an area where parents can play a big role. Using some of the everyday financial decisions made in your household as teaching opportunities can help your children become comfortable talking about money and ultimately making their own decisions with confidence and wisdom.