More and more American teenagers are learning about money in school, but financial literacy remains alarmingly low across the country. For Wharton economist Olivia S. Mitchell, classroom lessons aren’t enough — she believes financial education must begin at home, and as early as possible.

“If you don’t save when you’re young, you forego all the beauty of interest compounding that will make you a happier retiree,” Mitchell said in an interview with Wharton Business Daily.

What poor financial literacy costs

According to Mitchell, a lack of financial knowledge isn’t just a personal issue — it’s a national economic burden. Her research shows that Americans lose an estimated $390 billion a year due to poor financial decision-making.

People with weak budgeting skills are seven times more likely to spend over 20 hours a week managing personal finance problems. Many pay high overdraft fees, rack up credit card debt, or overspend on nonessential items — often because they lack a clear budget.

In 2024, only 48% of U.S. adults correctly answered the “Big Three” financial literacy questions developed by Mitchell and Stanford professor Annamaria Lusardi. These questions test basic understanding of compound interest, inflation, and risk diversification.

Age-based lessons for raising money-smart kids

As executive director of the Pension Research Council, Mitchell has long studied saving behavior. She says parents play a crucial role in building financial habits — and offers a clear, age-by-age guide:

Ages 3 to 5: Introduce bills and coins; show kids how physical and digital payments work.

Ages 6 to 9: Assign small tasks to earn money; use piggy banks or jars to teach the difference between spending and saving; explain that time and money are limited.

Ages 10 to 13: Teach them how to comparison shop and save for big purchases (like a bike or gaming console); help them open a savings account to learn about banks.

Ages 14 to 18: Teach teens to budget, track expenses, and live within their means. If they get a part-time job, explain taxes and how paychecks work. Also, discuss credit — both its benefits and its risks.

Financial education begins at home

Mitchell emphasizes that what parents do with money matters just as much as what they say. “I always tried to talk to my children about living within their means. Don’t spend it all. Try to spend less than you can,” she said.

She encourages families to include kids in everyday financial decisions, like choosing where to shop or finding ways to save money together. When her daughters were younger, Mitchell used Monopoly to explain risk and strategy. She also helped them run lemonade stands, wash cars, and sell Girl Scout cookies.

Another important lesson she taught them: distinguish between needs and wants. “It’s not that all debt is wrong or evil, but debt needs to be taken on with understanding and strategically,” she said.

A complement to school-based learning

The fact that 25 states now require a personal finance course to graduate high school is a big step forward. But Mitchell insists that financial literacy must be reinforced at home, especially in underserved communities.

“Children learn best when adults talk to them about money, involve them in decisions, and give them tools to make thoughtful choices,” she said.

For many Latino families who came to the U.S. seeking a more stable future, teaching kids how to manage money wisely may be one of the most empowering legacies they can pass on.