Expert Interview with Nancy Phillips about Teaching Financial Responsibility for Mint

After leaving a corporate career, Nancy Phillips spent time researching information on the best ways to teach children financial responsibility. She has put it all together in The Zela Wela Kids and has created an amazing tool for parents to begin teaching their children financial literacy and responsibility. Nancy took some time to chat with us about financial responsibility at a young age, philanthropy and The Zela Wela Kids.

How important is early financial literacy for children and teens?

Early financial education for our youth is absolutely critical. Extensive research has shown that children develop their financial attitudes and beliefs about money from their parents or the people who raise them by the age of 7. Parents are definitely the most influential financial teachers a child will ever have, particularly during the formative years when they are learning through observation and modeling. Right now, however, most parents think they should begin teaching their kids this information around the age of 12. There is a huge disconnect, and young adults are the ones "paying the price."

Teens today will likely be making 10 or more financial decisions a day by the end of high school. Technology makes it easier and faster to spend, and therefore much easier to go into debt than it has been in the past. There is less thought, emotion and awareness involved in electronic or "plastic" transactions. The brain functions differently when it uses cash - a pain mechanism fires - but this doesn't happen when you pay with plastic or phones.

Our youth need good information and real-life experience to prepare for the millions of financial decisions they will need to make in their lives. Long-term financial success is based on the cumulative effects of all the daily decisions we make. Learning the necessary skills is progressive, like learning a sport; it takes time and practice to learn from successes and mistakes. Better to learn these life lessons when the risks are low.

How does a lack of financial responsibility in children now affect our future economy?

Our financial situation affects all aspects of our well-being - health, education, career, relationships and personal interests, and these factors directly impact our economy.

Children with a good financial education will be better prepared to make the most of life. It will help them develop confidence, discuss and ask relevant financial questions, set goals and create opportunities for personal success. This is in stark contrast to a situation where they may expect to be taken care of, or simply not know or feel comfortable trying to take the steps necessary to achieve their desired goals. Developing financial competence creates a virtuous cycle of independence and success for the individual, instead of a vicious cycle of debt, hopelessness and, often, poor health.

Therefore, just a few segments of the economy that will be affected long term by continued financial illiteracy are: social and medical system costs, drug use and costs to organizations for employee sick time, along with crime rates. In regards to expanding the economy, if our youth are well prepared to make good personal financial decisions that lead to attaining personal goals and well-being, this would help improve the innovation, entrepreneurship and job creation within our economy, as well as enhance family stability and overall personal happiness.

How do you feel our society today is skimping on this responsibility? Can you share some examples?

Financial life skills really have to be taught in schools to ensure all children have access to the fundamental information. Personal financial skills are one of the most essential life skills needed in today's world simply because of how many financial decisions we make each day. Financial education has been "mandated" to be taught in schools before but has never come to fruition because of a variety of reasons, and allocating budget is a part of it for sure. This year, the U.K. was the first country to implement financial education for students from 5 years old right up through the teen years.

The growth of mass commercialism and powerful-targeted marketing directly to kids is also a major issue. Making wise spending choices may help an individual's happiness, financial future and mental well-being, but it doesn't create profit for the organizations promoting products and services. This is why it is so important for parents and teachers to help children and teens get off to a good start in weighing out needs and wants and becoming more aware of their decisions and the long-term consequences of those decisions. Poor financial choices can lead to frustration, lack of confidence, fear, anxiety and depression.

What are a few basic things parents should be doing with their kids now to instill this concept?

There are a number of important yet simple things we can do to help our kids learn basic financial skills and good decision-making. The key is that the information is relevant to them and they are given the opportunity to learn and practice. Repetition is also essential. I talk more about this in my Parents' Guide to Kids and Money, but here are a few to start:

  • Use cash and let them pay - Children need tangible, visual experiences with money to truly understand the "exchange" and learn the basic addition and subtraction involved with purchases. Paying and receiving change will help the child learn the value of things along with numeracy skills, and prepare them more effectively to use debit and credit cards.
  • Discuss needs and wants and how they differ for each person - help them weigh out and think through their decision. This helps them learn how to prioritize.
  • Divide all income into categories - Give, Invest, Save, Spend (GISS). Whether it's an allowance, earned income or both, this teaches the child different ways money can be used and is one of the most powerful money management skills and wealth-building habits a child can develop. Children can build their own GISS Bank, too; see the blog at www.zelawelakids.com
  • Look for everyday teaching opportunities - use experiences at the store, the gas station or as you make dinner. If they're a bit older, let them figure out the tip at a restaurant or the discount on a sale item.
  • Help them open a savings account - this gives real-life practice and research has shown teens with savings accounts feel more in control of their life and more optimistic about their future.

What part does philanthropy play in financial responsibility for both kids and adults?

This is a huge question philosophically, but I will try to answer simply. I do personally discuss giving as an important part of the GISS method of money management. From a financial standpoint, giving even small amounts of money and/or time can have a huge impact on our society as a whole.

The question goes much deeper than whether or not helping other people, animals or various other types of organizations is the right thing to do. Philanthropy empowers the giver because of the responsibility they feel through giving to the causes that matter to them. For a child, this gives them an incredible source of pride and confidence, and it stimulates more ideas to help others. This enhances personal growth and awareness of what's going on around them, and the realization that they can have a significant positive influence on their world.

Some of the stories I've been told about kids helping others after starting to use the GISS method are truly awe-inspiring. A big part of the reason for this is that giving changes our focus from what we may think we are lacking based on many of society's messages, to the abundance we do have, and how we can share and make a difference based on our personal values. It has been shown that not only do givers and receivers feel happier, even a person observing an act of kindness has an increase in serotonin, our natural "happiness" drug.

Please share about your books and The Zela Wela Kids.

Researching and developing The Zela Wela Kids resources and the new Steps to Success Teen Guide really all started because I was looking for resources for my own children. I wanted something fun that would help them become aware of and define their own personal values and goals, while learning life success skills and financial skills all at the same time. I couldn't find what I was looking for, so I started a quest to find the global best practices and then boil them down and make them simple to use. The information has been fascinating to bring together, and most of the principles are really universal. In the midst of my research, the recession hit, and it was obvious a lot of parents and teachers wanted this type of information as well, so I decided to publish the books and create more resources to help get this information out to people who were looking to help their children or students.

Now The Zela Wela Kids series is being used in various elementary schools in both the United States and Canada. The books cover essential topics like the difference between needs and wants, the GISS method of managing money and the importance of entrepreneurial thinking. The illustrated stories are simple and fun, and although written for 8- and 9-year-olds, they are being enjoyed by kids from 4 to 11 years old. The books are available in print and PDF downloadable formats depending on the need of the parent or teacher.

The audio program I created for parents is an easy way to learn the basic building blocks each child needs, and it suggests ways for them to practice essential financial life skills as they go from the early formative years up to the teens. I made it an audio format to make it convenient for busy parents. It comes with a workbook for those who like to have things in writing and an infographic which shows all the steps of The Zela Wela Kids Financial House on one page.

Today I'm really excited to announce that the Steps to Success Teen Guide, 25 Financial and Life Lessons to Help You Achieve Your Dreams is available for pre-order and will be launched in late November. For adults who have teens in their lives, this is a personal guide that will allow them to ask big questions of themselves regarding their future, learn critical success skills and fundamental financial skills they absolutely should have when they leave home.

All of these resources are available at ZelaWelaKids.com/store.

You can be in touch with Nancy on TwitterFacebook and LinkedIn. Also, enjoy the "15 Financial Life Skills Your Children Must Learn Before They Leave Home" free download courtesy of Nancy!