Douglas Scarboro

Douglas Scarboro is senior vice president and regional executive of the Memphis Branch of the Federal Reserve Bank of St. Louis.

Six lessons on financial literacy

By Updated: May 11, 2019 4:00 AM CT | Published: May 10, 2019 2:42 PM CT

At an age when children are playing with their Legos or asking for Happy Meals, they’re also forming early and foundational ideas about earning, saving and spending that they may carry with them throughout their lives.

For our children and for our city’s future, it is important that we teach personal finance and economics to young children.

<strong>Douglas Scarboro</strong>

Douglas Scarboro

Children often develop their financial behaviors as early as 7 years of age, according to research by David Whitebread and Sue Bingham of the University of Cambridge in England. So waiting until students are in high school to teach personal finance and economics can mean missing opportunities to help them learn and shape their habits. And it leaves children, during impressionable years, more apt to construct their understanding of the economy and personal finance from what they observe around them. This frequently results in misunderstandings.

For example, children who see their parents get money from an ATM may not have the context to understand that a bank account is directly connected to the use of the ATM. Without that context, a child hearing, “We can’t afford that this month,” is likely to think, “Just go get money out of the machine!”

Similarly, children may witness an adult paying for most items with a credit card or a mobile phone payment service without recognizing this as money being spent.  And often children don’t connect your work with income; they may not realize that adults work and are paid for that work.

At the St. Louis Fed, we have a team of educators, researchers and specialists who are making economic education more accessible and creating fun and memorable lessons and resources for teachers, parents and consumers around the country.

That team has compiled six pertinent things we must teach children:

1. People work to earn income. Be explicit when explaining to children that you work to earn income to support your family. Give them opportunities to earn, as well.

2. People spend some income, save some income, and donate some income. Give the children in your life opportunities to do this — spend, save, donate.

3. Saving is a good habit. Provide incentives for your children to save, such as offering to match a percentage of what they put in their piggy banks. Encourage them to save a set amount before considering purchasing a new toy.

4. Adults can’t have everything they want — children can’t, either. Teach them to prioritize and make careful choices.

5. Spending and saving decisions have consequences. Allow your children to live with — and talk to them about — those consequences.

6. Banks and credit unions are safe places to save your money. Tell children about them, including that those institutions pay interest on savings.

I try to share these tips with my children.

Visit our website at and browse through more than 400 lessons, articles and other tools for teaching and learning more about personal finance and economics.

We believe, based on research, that children who are taught valuable lessons about spending, saving and other personal finance topics at a young age are more likely to become adults who are more financially responsible.

Share the personal finance tips in this article with your children, grandchildren, students and the other young people in your life. Research shows it may help them grow into teenagers and adults with a better grasp on their personal finances.


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