FDIC chair on how to talk to kids about money
TEXT OF INTERVIEW
TESS VIGELAND: One year ago we were in Portland, Ore., doing our show live onstage. An entire hour about kids and money. So we thought we’d spend some time on that topic again today.
First up, Sheila Bair, head of the Federal Deposit Insurance Corporation. We spoke with her a few weeks ago about the nation’s banks. And we also took the opportunity to talk to her about financial literacy. After all, she wrote two children’s books about money. I asked when you should start “the talk.”
SHEILA BAIR: Well I think they should start very early. I mean our kids starting taking an interest in money when they were three. Initially, they like to play with the pennies and count them and stack them and things like that. And then later they start understanding the value of money, what it symbolizes. So I think money is a great way to learn math. You just start counting, 100 pennies in $1. So yeah,, I think it’s important to tap into that natural interest as early as possible.
VIGELAND: I think what a lot of parents tell us is that they’re hesitant to do that because they’re not sure that they have enough education.
BAIR: That’s one of the reasons I wanted to write picture books for children because the parents read the picture books with their kids, so the parents can maybe pick up some information too as they’re reading the book with their child. And so I think that’s right. There is definitely a financial education need for the adult population as well. The FDIC has something called Money Smart. It’s a very widely used financial education curriculum. You can get information online about it from [the FDIC] website. And I think that is one very good resource for adults who would like to learn more about managing their personal finances.
VIGELAND: It seems that financial literacy is becoming a bit of a buzz word these days, a buzz phrase. But still there is no national requirement for economics or personal finance curriculum in high school or middle school. Why do you think that is?
BAIR: That’s a good question. I think a lot of that is just the way our school system is structured in this country. It is localized, so it’s very difficult to have standards that apply across the board. I hate to say that, but I think one way to get more of this into the schools is to have some of the tests that unfortunately we find we need to rely on these days and I think there are reasons for that, but making sure test for financial knowledge, I think that’s another incentive for schools to get that kind of content into the basic curriculum.
VIGELAND: Your parents were children of the Great Depression.
BAIR: They were, yeah.
VIGELAND: How do you think that shaped what you learned about money as a kid?
BAIR: I think it made me conservative and very careful. My mother grew up on a farm in the wake of the Great Depression and then suffered through the Dust Bowl. So she knows about how important it is to conserve and save. Those are certainly strong values that she instilled for me and my sister. It’s harder these days to teach kids those kind of lessons and I guess the unfortunate part of this now is this recession has brought home to people what economic hardship means.
VIGELAND: What did you learn about money in school?
BAIR: Nothing, really.
VIGELAND: Yeah. Yeah.
BAIR: I mean, I had home ec, remember home ec? Well, actually, I shouldn’t say nothing because I learned how to make a dress and bake a cake. But I also learned the basics of a family budget. I’m glad that I learned how to bake a cake and sew a dress too. The basics of family budgeting were important and, of course, back then it was much simpler. It was really more about your grocery budget and things like that. Now it’s about 401(k)s and 529s and deposit insurance limits and all those kinds of things.
VIGELAND: I guess I would end by just asking for — both of the chair of the FDIC and as a mom — really the best piece of advice you would have for parents in teaching their kids about money.
BAIR: I think I’m going to have two answers there. One is understanding risk. They need to understand risk. You have to put your money somewhere, but understanding risk. And understanding what your risk challenges are and that there are risks out there is very important. And also, I think a message of thrift and savings. There needs to be balance between consumption and saving. And that sometimes it’s better, if you want something, to wait and save for it and make sure you really want it before you buy it. It will mean more to you and that you also might find during that waiting period that you didn’t really want it after all. And so I think those are the most important fundamental ideas that parents should impart to their kids.
VIGELAND: FDIC chairwoman Sheila Bair, speaking with us from her office in Washington.
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