The University of Wisconsin has partnered with the Corporation for Enterprise Development to conduct a review to determine what skills parents should be teaching their children to develop financial well-being.
CFED is leading the research but UW has played a central role in crafting the literature review, Emory Nelms, research program associate for CFED, said in an email to The Badger Herald.
In the review, UW looked at existing literature to identify how children can best develop the skills and approaches they will need to become adults who can manage their own finances, a UW statement said.
“Certainly the literature review has helped us at CFED to develop a foundation of learning about how children and youth are financially socialized and the kinds of skills, attitudes and habits that youth need to develop in order to transition into financially capable adults,” Nelms said.
The review showed that many of the skills and values are developed at an early age, Nelms said. The review was designed to summarize knowledge about how and when these factors develop throughout childhood, as well as where the gaps in research are, he said.
There is often a question about when it is appropriate to introduce ideas about finance and money to children because they tend to be “grown-up stuff,” Charles Kalish, an educational psychology professor at UW, said.
Financial literacy education as it currently exists is learning about detailed, formal mathematical rules, Kalish said. The review looked at moving away from formal calculations for younger children, he said.
Executive functions, such as cognitive abilities that tell people when to plan, to wait, to delay and to avoid temptations, are connected to good financial behavior and present in younger children, Kalish said.
The review projected that parents were establishing basic attitudes and habits toward finances in their children, Kalish said. One of the things UW thinks parents can do is model good financial decision-making behavior for their kids, he said.
“When you ask people where did you learn to be financially responsible the answer is, ‘My parents,’” Kalish said. “It’s clear parents have a pretty big influence. Exactly what they do is less clear.”
Developing executive function skills and cognitive development are important because they lay the foundation for future learning, Nelms said. Nelms added they also contribute to other cognitive skills like impulse control, future orientation, planning and many of the other skills that people tend to think of as necessary for good money management.
The next step in the project is identifying whether parents are following the programs UW has identified as productive.
“We’ve identified what are some good programs, what kinds of things are people doing and more importantly, what are people not doing,” Kalish said. “Our next step in the project is to know what’s out there, and hopefully make some recommendations about new initiatives in financial educations.”
