September 2016

Building blocks to help 

youth achieve financial 

capability

A new model and recommendations
1 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Table of contents

Table of contents......................................................................................................... 1

1. Introduction........................................................................................................... 3

2. The developmental model.................................................................................... 6

2.1 What is financial capability? .....................................................................7

2.2 What are the three youth building blocks of financial capability?...........9

2.3 When do children and youth acquire the building blocks of financial 

capability? ............................................................................................... 12

2.4 How do children and youth acquire the building blocks of financial 

capability? ............................................................................................... 15

2.5 What are the building block competencies for each developmental 

stage?....................................................................................................... 17

2.6 Why do developmental windows present the best opportunities for 

youth to acquire the building blocks of financial capability?.................31

3. Recommendations for applying the financial capability 

developmental model ......................................................................................... 33

3.1 Recommendation one: For children in early childhood, focus on 

developing executive function skills .......................................................35

3.2 Recommendation two: Help parents and caregivers to more actively 

influence their child’s financial socialization ........................................ 39

3.3 Recommendation three: Provide children and youth with experiential 

learning opportunities ........................................................................... 44
2 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.4 Recommendation four: Teach youth financial research skills .............. 51

4. Conclusion .......................................................................................................... 54

Appendix A: ............................................................................................................... 56

Youth capability milestones summary ............................................................56

Appendix B: ............................................................................................................... 59

Understanding Financial Well-Being ..............................................................59

Appendix C: ............................................................................................................... 61

Methodology ....................................................................................................61

Appendix D: ............................................................................................................... 64

Definition of key terms ................................................................................... 64
3 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

1. Introduction

To navigate the financial marketplace effectively, adults need financial knowledge and skills, 

access to resources, and the capacity to apply their money skills and habits to financial 

decisions. Where and when during childhood and adolescence do people acquire the 

foundations of financial capability? The Consumer Financial Protection Bureau (CFPB) 

researched the childhood origins of financial capability and well-being to identify those roots 

and to find promising practices and strategies to support their development.

This report, “Building blocks to help youth achieve financial capability: A new model and 

recommendations,” examines “how,” “when,” and “where” youth typically acquire critical 

attributes, abilities, and opportunities that support the development of adult financial capability 

and financial well-being.1 CFPB’s research led to the creation of a developmentally informed, 

skills-based model.2 The many organizations and policy leaders working to help the next 

generation become capable of achieving financial capability can use this new model to shape 

priorities and strategies. The financial capability developmental model can be used to:

§ Refine existing programs and financial education resources. 

 

1 Financial well-being: The goal of financial education, Consumer Financial Protection Bureau (2015), available at 

consumerfinance.gov/reports/financial-well-being/.

2 The research described in this report was conducted by the Corporation for Enterprise Development (CFED), under 

contract to CFPB. CFED’s research team also included academic experts in financial capability and educational and 

developmental psychology from the University of Wisconsin–Madison and the University of Maryland, Baltimore 

County, as well as ICF International.
4 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

§ Develop and test new and innovative financial education strategies.

§ Make evidence-informed financial education policy and funding decisions.

Where we refer to some existing resources or programs in this report, they are provided as 

examples only. Inclusion of such resources should not be considered an endorsement or 

recommendation by the CFPB. There are many other possible programs that are not included 

that may also be effective.

This research is not an exhaustive overview of every factor in the lives of children and teens that 

contributes to financial capability. Indeed, many broad factors that contribute to adult financial 

well-being are outside the scope of this report. These include structural and contextual factors, 

such as:

§ A community with abundant economic opportunity.

§ Quality educational opportunities.

§ Family income and wealth.

§ Access to affordable, safe, and appropriate financial products and services.

§ Quality employment opportunities.

This report identifies individual abilities and characteristics that financial education 

organizations and policy and community leaders can seek to influence. The CFPB continues to 

stress the importance of introducing key financial education concepts early, building on that 

foundation consistently throughout the K-12 years, and, along the way, involving parents, 

caregivers, and youth program providers as partners in preparing children and youth for skillful 

money management in the future.3 This underscores the need for coordination and collective 

action guided by a shared understanding of how to promote financial capability.

 

3 Transforming the Financial Lives of a Generation of Young Americans: Policy Recommendations for Advancing

K-12 Financial Education, Consumer Financial Protection Bureau (2013), available at

files.consumerfinance.gov/f/201304_cfpb_OFE-Policy-White-Paper-Final.pdf.
5 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

In addition to presenting a new financial capability developmental model, the CFPB created 

recommendations derived from its research to help those seeking new ideas and insights for 

delivering evidence-based, age-appropriate, and developmentally appropriate financial 

education policies and programs.
6 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

2. The developmental model

The financial capability developmental model provides a new evidence-based framework for 

understanding when, where, and how young people learn and develop the building blocks of

financial capability. This research brings together what is known in a variety of disciplines to 

create recommendations that connect theory and practice in the financial education arena.4

The CFPB created the model to help financial education policy and program leaders to more 

effectively champion, design, and deliver financial education opportunities for American youth. 

Recognizing the general lack of research in this area, the CFPB focused on identifying the 

developmental origins of financial capability, as well as the most promising strategies and 

techniques for positioning youth for a life of adult financial capability. 

Program leaders, parents, caregivers, financial educators, education policy and community 

leaders, and other stakeholders can use the financial capability developmental model to:

§ Understand when, where, and how children acquire the building blocks of financial 

capability and apply that knowledge to evaluate the developmental fit of programs.

§ Develop and test new and innovative financial education strategies.

§ Refine existing financial education programs, resources, and curricula.

 

4 See Appendix C for the research methodology underlying the findings and recommendations described in this report.
7 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

§ Inform financial education policy.

§ Identify age-appropriate financial capability milestones.

2.1 What is financial capability?

To understand how children form the building blocks of financial capability, it is important to 

define what that term means. Financial capability is the capacity, based on knowledge, skills, 

and access, to manage financial resources effectively.5

To be financially capable, individuals must be able to understand and apply financial knowledge. 

Individuals also have to acquire healthy money habits, norms, and rules of thumb6 (automatic, 

mental shortcuts that simplify decision-making), as well as the ability to stick to a plan and 

successfully complete financial tasks.

Developing one’s financial capability is an important stepping-stone on the path to adult 

financial well-being. People who have financial well-being can fully meet current and ongoing 

financial obligations, can feel secure in their financial future, and have the financial freedom to 

make choices that allow enjoyment of life.7 Prior CFPB research has identified the abilities, 

attributes, and behaviors – the personal factors – that seem to support financial well-being in 

 

5 Charter of the President’s Advisory Council on Financial Capability, U.S. Department of the Treasury (2010), 

available at treasury.gov/resource-center/financialeducation/Documents/PACFC%202010%20Amended%20Charter.pdf.

6 Rules of thumb are automatic, “go-to” responses we have to particular environmental cues that simplify the 

decision-making process and yield a reliably “good enough” solution. Also called cognitive heuristics, rules of thumb 

are mental shortcuts we use to quickly make decisions or resolve challenges when we have limited information.

7 Financial well-being: The goal of financial education, Consumer Financial Protection Bureau (2015), available at

consumerfinance.gov/reports/financial-well-being/.
8 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

adulthood.8 These personal drivers of adult financial well-being include deliberate behaviors, 

such as engaging in financial research, setting financial goals and making concrete plans to meet 

them, and following through on financial decisions. To perform these behaviors well, one must 

have factual knowledge and financial skills or “know-how.” Effective navigation of day-to-day 

financial life also requires healthy money habits, norms, and rules of thumb. Adults with higher 

levels of financial well-being also seem to have some notable personal traits and attitudes. These 

include: 

§ Impulse control and the ability to delay gratification in service of future rewards.

§ Perseverance in the face of obstacles.

§ Belief in their ability to manage money and achieve financial goals (financial selfefficacy).9

§ A tendency to make financial decisions in light of their own standards rather than in 

comparison to other people (internal frame of reference).

Factors beyond an individual’s control, such as structural opportunities, macroeconomic 

context, and family resources, of course play a significant role in financial outcomes and serve as 

critical enablers of an individual’s ability to put the financial skills they have developed to use. 

However, our research focuses on the areas where financial education efforts can most help to 

empower consumers – on the knowledge, skills, attitudes, and behaviors that may be influenced 

by financial education and other decision-making supports. 

 

8 A summary of these adult abilities, attributes, and behaviors is provided in Appendix B. For a full description of 

research methods and findings related to adult drivers of financial well-being, see Financial well-being: The goal of 

financial education, Consumer Financial Protection Bureau (2015), available at

consumerfinance.gov/reports/financial-well-being/. 

9 Financial self-efficacy is confidence in one’s ability to manage finances and achieve financial goals without being 

overwhelmed, such as sticking to a spending plan.
9 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

2.2 What are the three youth building blocks 

of financial capability?

The CFPB conducted research to better understand how to best prepare youth for financial 

capability in adulthood. Little was widely known in the financial education field about how 

youth acquire the knowledge and skills, as well as the habits, norms, rules of thumb, and 

behaviors, that support adult financial capability. Our research suggests that the personal 

factors that comprise financial capability most likely all stem from three interlocking 

components of youth development: executive function, financial habits and norms, and financial 

knowledge and decision-making skills.

Children begin acquiring these building blocks of financial capability as early as preschool and 

continue to develop them as teens and young adults. Children and youth do not acquire the 

building blocks separately or in isolation. Rather, the building blocks are capabilities that 

support and catalyze the development of additional skills and capabilities.

1. Executive function – a set of cognitive processes used to plan for the future, focus our 

attention, remember information, and juggle multiple tasks successfully. Executive function 

helps manage the flow of information in our day-to-day lives and keeps mental distractions 

at bay. It encourages the development of personal traits and social/emotional skills used to 

achieve financial well-being, such as perseverance,10 self-regulation,11 and the ability to 

prioritize future gain over current desires. 

2. Financial habits and norms – the values, standards, routine practices, and rules of 

thumb used to routinely navigate our day-to-day financial lives. One develops unconscious, 

automatic decision-making strategies based on attitudes, values, emotions, social norms, 

and contextual cues. Financial habits and norms come into play in financial capability 

 

10 Perseverance is the willingness to continue doing something that is difficult or that you failed at before.

11 Self-regulation, in the context of financial capability, is the ability to understand and control your impulses, 

behavior, feelings, and thoughts in financial situations, and to respond wisely when facing financial challenges, for 

example, by persevering, or by delaying gratification (see cognitive heuristics footnote below).
10 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

because we use them to decide what is desirable, or even possible, in our lives, as well as to 

guide our day-to-day behaviors. 

3. Financial knowledge and decision-making skills – familiarity with financial facts 

and concepts, as well as conscious and intentional decision-making skills. These include 

budding versions of skillful money management, financial planning, goal setting, and 

financial research.

Table 1, on the next page, provides a summary of each of the building blocks and illustrates how 

it contributes to financial capability in adulthood.
11 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

TABLE 1: THREE YOUTH BUILDING BLOCKS OF FINANCIAL CAPABILITY

Executive 

function

Financial habits and 

norms

Financial knowledge 

and decision-making 

skills

What it is

Self-control, working 

memory,12 problemsolving

Healthy money habits, 

norms, rules of thumb

Factual knowledge, 

research and analysis 

skills

What it supports 

in adulthood

Future orientation,13

perseverance, planning 

and goal setting, general 

cognitive flexibility14

Decision shortcuts15 for 

navigating day-to-day 

financial life and 

effective routine money 

management

Deliberate financial 

decision-making 

strategies, like financial 

planning, research, and 

intentional decisions

Examples 

of financial 

application in 

adulthood

Saving, setting financial 

goals, developing and 

executing budgets

Having a system to pay 

bills on time

Effective comparison 

shopping

 

12 Working memory is the ability to hold onto and process several pieces of information at once. In the context of 

building blocks of financial capability, it is used in executive function when we briefly store and recall information to 

compare options and make decisions.

13 Future orientation is having a long-term outlook and believing that there will be opportunities for you in the years 

ahead.

14 Cognitive flexibility is the ability to think of different ways to solve a problem. It is a component of executive 

function that allows us to think creatively to address unexpected challenges.

15 Decision shortcuts are routine responses we use to quickly make decisions or resolve challenges when we have 

limited information.
12 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

2.3 When do children and youth acquire the 

building blocks of financial capability?

The three building blocks of financial capability are typically acquired at different rates over 

three broad developmental stages: early childhood (ages 3−5), middle childhood (ages 6−12), 

and the teen and young adult years (ages 13−21). The ages linked to the developmental stages 

are only broad estimates because individuals vary in their maturity level at each age, and many 

of the attributes and abilities span multiple periods.

These three developmental stages are based on:

§ When individuals are commonly capable of acquiring particular attitudes, habits, skills,

and cognitive capacities.

§ When young people typically gain access to financial decision-making experiences – for 

example, when do youth begin to receive an allowance, earn money, and make spending 

decisions? 

None of the three buildings blocks of financial capability completely emerges during a single 

broad developmental age. Instead, children, teens, and young adults accumulate them in an 

overlapping fashion during early childhood, middle childhood, and as teens and young adults.

During early childhood (ages 3−5), executive function begins to develop rapidly through 

children’s experiences with their environment. Executive function development continues 

through middle childhood and into adolescence and young adulthood. 

During middle childhood (ages 6−12), as children have more experiences outside the home and 

begin to gain a sense of personal identity, financial habits and norms begin to form and continue 

to do so throughout adolescence. Children develop financial attitudes, habits, and norms by 

observing and interacting with parents and caregivers. They are also influenced by sources 
13 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

outside the home, including peers, people at school, community members, and media. This 

process is called financial socialization.16

During the teen years and young adulthood (ages 13−21), explicit financial knowledge and 

decision-making skills become more relevant, especially for youth who begin to make purchases 

on their own and take on financial responsibilities such as earning money, opening a bank 

account, or borrowing for education. Teens may act as “financial apprentices” to the adults in 

their lives, engage in experiential learning,17 and begin to develop firsthand knowledge and skills 

that they will use to make intentional financial decisions.

Table 2 on the next page illustrates how the three building blocks of financial capability typically 

emerge over the three developmental stages.

1. Executive function develops significantly in early childhood and continues to develop 

throughout middle childhood and adolescence. 

2. Financial habits and norms are the primary focus of financial development during middle 

childhood, though early norms and values begin to develop in early childhood and continue 

to grow into the teen and young adult years. 

3. Financial knowledge and decision-making skills typically do not emerge until 

adolescence. However, children acquire underlying knowledge earlier. For example, they 

typically pick up basic numeracy in early childhood and simple money management 

knowledge and skills during middle childhood.

 

16 Financial socialization occurs when youth pick up financial attitudes, habits, and norms from observing financial 

behaviors of parents, peers, educators, media, or other influencers.

17 Experiential learning is the process of deriving meaning from direct or hands-on experiences. Experiential learning 

opportunities encourage children and youth to take initiative, make decisions, experience the results of their choices, 

and learn through reflection.
14 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

TABLE 2: PRIMARY DEVELOPMENTAL STAGES FOR YOUTH BUILDING BLOCKS OF FINANCIAL 

CAPABILITY
15 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

2.4 How do children and youth acquire the 

building blocks of financial capability?

In this report, we refer to the processes and experiences for acquiring the building blocks of 

financial capability and the settings where children engage in financial development activities as 

pathways and platforms, respectively.

Pathways are the processes and experiences through which youth gain and develop the three 

building blocks of financial capability. 

Major pathways include: 

§ Early experiences and environment.

§ Parental influence.

§ Financial socialization.

§ Experiential learning.

§ Direct explicit instruction. 

Platforms are the locations or settings where children, teens, and young adults engage in 

activities that develop and reinforce financial capability attributes and abilities. Major platforms 

include:

§ Home.

§ Schools.

§ Programs, including after-school, community-based, public, and private offerings.

Children gain knowledge and experience through a variety of pathways and platforms. Given 

that parents or caregivers are often the most influential agents of financial socialization, a child’s 

home environment, for example, may be a particularly influential platform for stimulating 

executive function and the development of financial habits and norms. 

Schools and communities are also critical platforms of financial socialization. A teen can learn 

financial knowledge and decision-making skills by attending a reality fair delivered in a 

community setting, or in a classroom. During a reality fair, teens role-play common adult 
16 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

financial challenges such as budgeting monthly income and paying bills, then review their 

decisions with a financial counselor.18

The kinds of pathways and platforms relevant to the building blocks of financial capability 

change as children age. For example, when children enter elementary school, the school setting 

becomes a powerful platform that may not have been available during early childhood. Once 

youth enter high school, finding a job or engaging in after-school programs and extracurricular 

activities can greatly expand available platforms and pathways. 

Pathways can also emerge from partnerships between organizations. Schools can partner with 

banks or credit unions to establish school-based savings programs, which help students learn 

about the importance of saving and other money management topics. These bank-in-school 

programs use the pathway of experiential learning within the platform of a school setting. 

Platforms can also be virtual. For example, computer and mobile technologies are sometimes 

used to simulate experiences or create role-playing activities much like reality fairs. Often, 

particular pathways are not limited to a single platform. For example, the pathway of direct 

instruction could be delivered via a school platform, by parents or caregivers in a home 

platform, or in a community platform by a program provider. 

 

18 Reality Fairs, The National Credit Union Foundation, available at ncuf.coop/how-we-help/realsolutions/experiential/reality-fairs.cmsx.
17 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

2.5 What are the building block 

competencies for each developmental 

stage?

This section details the specific competencies that children and youth typically develop during 

early childhood (ages 3−5), middle childhood (ages 6−12), and adolescence (ages 13−21). For 

more information, see Appendix A, which summarizes capability milestones at different 

developmental stages for all three building blocks of financial capability and links them to adult 

characteristics that research suggests support financial well-being.19 This visual tool can help 

program providers as well as policy and community leaders envision the potential outcome goals 

of financial capability programming.

2.5.1 Financial capability competencies for early childhood 

(ages 3−5): Executive function develops rapidly, and 

very early financial knowledge and norms begin 

to form

Executive function is the primary building block most children acquire during early childhood. 

Executive function helps individuals plan, defer gratification, focus attention, remember 

information, and successfully juggle multiple tasks. These cognitive abilities support impulse 

control and future-oriented skills, which in turn provide a foundation for performing adult 

financial tasks such as setting financial goals, saving, and setting and following a budget.20, 21

 

19 These adult characteristics are summarized in Appendix B and described in detail in Financial well-being: The goal 

of financial education, Consumer Financial Protection Bureau (2015), available at 

consumerfinance.gov/reports/financial-well-being/.

20 Moffitt, Terrie E., Louise Arseneault, Daniel Belsky, Nigel Dickson, Robert J. Hancox, HonaLee Harrington, Renate 

Houts, Richie Poulton, Brent W. Roberts, Stephen Ross, Malcom R. Sears, W. Murray Thomson, and Avshalom Caspi,

A gradient of childhood self-control predicts health, wealth, and public safety, 108(7) Proceedings of the National 

Academy of Sciences 2693–2698 (2011).
18 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

In addition to developing executive function, children as young as 3−5 years old can develop 

extremely basic knowledge and skills, which support personal financial management later in 

life.22, 23 These include:

§ Understanding and working with numbers such as basic numeracy.

§ Learning to compare different characteristics of categories of objects (shiny versus dull, 

big versus small).

§ Familiarity with coins.

§ Learning about the concepts of buying and selling.

§ Finding out about financial institutions. 

Young children are also forming attitudes about consumerism even before they start school. For 

instance, they may recognize store names, and they may see advertisements targeted to them.

Executive function typically increases dramatically during the first 5 years of life. In the years 

before children enter kindergarten, they are actively learning and developing within a unique 

and dynamic context shaped by their early experiences, environment, and interactions with 

their primary caregivers. Executive function development during these early years is particularly 

important because it facilitates the development of higher-level abilities later in life. These 

 

21 Lynch Jr., J. G., R. G. Netemeyer, S. A. Spiller, and A. Zammit, A Generalizable Scale of Propensity to Plan: The 

Long and the Short of Planning for Time and for Money, 37(1) Journal of Consumer Research 108–128 (2010).

22 Holden, Karen, Charles Kalish, Laura Scheinholtz, Deanna Dietrich, and Beatriz Novak, Financial Literacy 

Programs Targeted on Pre-School Children: Development and Evaluation, La Follete School Working Papers (2009), 

available at http://digital.library.wisc.edu/1793/36314.

23 Whitebread, David, and Sue Bingham, Habit Formation and Learning in Young Children (London: Money Advice 

Service 2013).
19 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

abilities include skills such as financial planning and accurate comparison of multifeatured 

financial products.24

External factors such as socioeconomic circumstances, limited access to a wide range of 

economic opportunities, and early experiences with adversity (e.g., abuse, neglect, or other 

stressors) can negatively affect executive function development.25 For example, a child who 

grows up in an environment that does not reward delayed gratification26 may not develop that 

skill. At the same time, studies have shown that interventions can ameliorate the impact of 

environmental stressors on executive function development and that children with the poorest 

executive functioning prior to intervention show the greatest improvement.27, 28, 29, 30

 

24 Gathercole, Susan E., Susan J. Pickering, Camilla Knight, and Zoe Stegmann, Working memory skills and 

educational attainment: evidence from national curriculum assessments at 7 and 14 years of age, 18(1) Applied 

Cognitive Psychology 1−16 (2004).

25 Blair, Clancy, and Cybele C. Raver, Child Development in the Context of Adversity: Experiential Canalization of 

Brain and Behavior, 67(4) American Psychologist 309–318 (2012).

26 Delayed gratification is the willingness to forgo or postpone an immediate reward or benefit in favor of a future 

benefit. Along with a future orientation and impulse control, it supports self-regulation.

27 Klingberg, T., E. Fernell, P. J. Olesen, M. Johnson, P. Gustafsson, K. Dahlström, and H. Westerberg, Computerized 

Training of Working Memory in Children with ADHD—A Randomized, Controlled Trial 44(2) Journal of the 

American Academy of Child and Adolescent Psychiatry 177–186 (2005).

28 Lillard, Angeline, and Nicole Else-Quest, Evaluating Montessori Education, 313 Science 1893–1894 (2006).

29 Diamond, Adele, Executive Functions, 64(1) Annual Review of Psychology 135–168 (2013).

30 Diamond, A., Activities and Programs That Improve Children’s Executive Functions, 21(5) Current Directions in 

Psychological Science 335–341 (2012).
20 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Table 3, below, summarizes the primary and secondary elements of the building blocks of 

financial capability that develop during early childhood. 

TABLE 3: WHAT HAPPENS IN EARLY CHILDHOOD (AGES 3−5)

Primary

Executive function develops

§ Supports future-oriented behaviors

§ Provides cognitive basis for financial reasoning skills

§ Supports self-control and perseverance

§ Forms a foundation for ability to follow through

Secondary

Basic numeracy develops

§ Provides the foundation for applied math skills

§ Is integral to skillful money management

§ Is integral to financial analysis skills

Financial attitudes begin to develop

§ Examples: future orientation and delayed gratification

§ Support ongoing development of executive function and later-in-life financial skills

How it happens: pathways and platforms

§ Children learn through observation; direct, explicit instruction; and practice.

§ Home, day care, or preschool are the most common platforms.

§ Parents and other caregivers have the most influence.
21 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Table 4, below, provides a checklist of financial capability milestones relevant to early 

childhood.

TABLE 4: CAPABILITY MILESTONES FOR EARLY CHILDHOOD

1. Executive 

function

2. Financial habits 

and norms

3. Financial knowledge and 

decision-making skills

§ Does the child begin to 

demonstrate selfregulation, persistence, 

and focus?

§ Can the child demonstrate 

these qualities when using 

and managing limited 

resources like time, 

money, treats, or 

belongings?

§ Has the child developed 

basic values and attitudes 

around keeping (saving) 

and using (consuming) 

resources?

§ Does the child have early 

numeracy skills like 

counting and sorting?

§ Does the child grasp basic 

financial concepts like 

money and trading?

2.5.2 Financial capability competencies for middle childhood 

(ages 6−12): Financial habits and norms are readily 

acquired, and executive function continues to develop 

During middle childhood, children typically begin to acquire money habits, norms, and values 

through a process called financial socialization. 31 The financial habits and norms developed 

during this developmental stage will influence many of the financial behaviors and habits as 

adults. 32 During this stage, children also continue to develop executive function and related 

 

31 Whitebread, David, and Sue Bingham, Habit Formation and Learning in Young Children (London: Money Advice 

Service 2013).

32 Danes, Sharon M., Parental Perceptions of Children’s Financial Socialization, 5 Journal of Financial Counseling 

and Planning 127–146 (1994).
22 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

skills. For example, youth may begin to make future plans for use of an allowance. Youth also 

begin to acquire basic financial knowledge that they will use to make purposeful financial 

decisions as adults.

During this developmental stage, children begin to form independent identities as they interact 

more frequently with people outside of their home environment. This lays the groundwork for 

developing a financial identity through the acquisition of financial values, habits, and norms. 

This focus on the development of financial habits and norms in middle childhood goes beyond 

learning basic financial lessons.

Children in this developmental stage might receive an allowance or money as a gift, or perhaps 

have some input on the family’s spending decisions.33 As children have more firsthand 

experiences with acquiring, spending, and perhaps even saving small amounts of money, they 

begin to develop their sense of what is normal or appropriate in money management. 

Although financial socialization occurs through many different platforms, including school, 

media, and peers, parents or caregivers are typically the primary agents of financial socialization 

during elementary and middle school ages.34 Financial socialization occurs through implicit 

observation and through direct instruction. 

Parents of elementary schoolers can model healthy choices, behaviors, and attitudes as they 

engage in day-to-day and monthly activities, such as paying bills or grocery shopping. Children 

observe these actions and implicitly draw conclusions and internalize financial behaviors and 

norms – for example, always taking a shopping list to the grocery store. 

Parents also provide explicit, direct financial lessons when they set standards and expectations –

for example, telling children they must save a portion of their allowance (or cash they may earn 

 

33 Whitebread, David and Sue Bingham, Habit Formation and Learning in Young Children (London: Money Advice 

Service 2013).

34 Beutler, Ivan, and Lori Dickson, Handbook of Consumer Finance Research, Consumer Economic Socialization 83–

102 (New York: Springer 2008).
23 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

or receive as gifts) because it is important to set aside a portion of income before spending any 

of it. Schools are a platform where children can acquire explicit financial knowledge and 

resource management skills. 

During this developmental stage, children usually begin to grasp abstract concepts that 

underpin personal finance, such as managing a household budget. In middle childhood, youth 

are more fully able to understand the future and can determine the timing of things happening 

months away.35, 36

Executive function and basic money management skills are also continuing to develop during 

middle childhood. Youth are beginning to grasp simple constructs, such as investments of time 

or money, and consider trade-offs. For example, a youth in middle childhood who is allowed to 

decide whether to spend allowance every week or to save for a large item is practicing critical 

goal-oriented financial planning. 

Table 5 on the next page summarizes the primary and secondary elements of financial capability 

that develop during middle childhood.

 

35 Scheinholtz, Laura, Karen Holden, and Charles Kalish, Cognitive Development and Children’s Understanding of 

Personal Finance, Consumer Knowledge and Financial Decisions: Lifespan Perspectives 29–47 (New York: Springer

2012).

36 Whitebread, David, and Sue Bingham, Habit Formation and Learning in Young Children (London: Money Advice 

Service 2013).
24 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

TABLE 5: WHAT HAPPENS IN MIDDLE CHILDHOOD (AGES 6−12)

Primary

Financial habits and norms develop

§ Frugality versus materialism

§ Value of saving and planning ahead

§ Reliance on own values when making spending decisions 

Financial self-confidence (financial self-efficacy37) grows

§ Gaining experience managing resources

§ Developing attitudes toward financial institutions

Secondary

Executive function continues to develop

§ Supports financial analysis skills, planning and goal setting, conscientiousness, and grit

Applied math and basic financial skills develop

§ Helps money management

§ Helps financial knowledge

How it happens: pathways and platforms

§ Financial socialization38

§ Home is still most important, but community, media, peers, and school gain influence

§ Implicit learning dominates, but explicit learning opportunities increase

 

37 Financial self-efficacy is confidence in one’s ability to manage finances and achieve financial goals without being 

overwhelmed, such as sticking to a spending plan.

38 Financial socialization occurs when youth pick up financial attitudes, habits, and norms from observing financial 

behaviors of parents, caregivers, peers, educators, media, or other influencers.
25 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Table 6, below, provides a suggested checklist of financial capability milestones relevant to

middle childhood.

TABLE 6: CAPABILITY MILESTONES FOR MIDDLE CHILDHOOD

1. Executive 

function

2. Financial habits 

and norms

3. Financial knowledge and 

decision-making skills

§ Does the child show the 

ability to plan ahead and 

delay gratification?

§ Does the child show future 

orientation?

§ Does the child begin to 

show a positive attitude 

toward savings, frugality, 

planning, and self-control?

§ Does the child begin to 

have positive financial 

habits, like planning and 

saving?

§ Can the child make 

spending and saving 

decisions aligned with his 

or her goals and values?

§ Is the child self-confident 

about completing ageappropriate financial 

tasks?

§ Does the child understand 

core basic financial 

processes and concepts?

§ Has the child successfully 

managed money or other 

resources to reach his or 

her own goals?

2.5.3 Financial capability competencies for teens and young 

adults (ages 13−21): Independent financial decisionmaking increases, and executive function continues to 

mature

During adolescence and young adulthood, many individuals start making consequential 

financial decisions. For example, teens may make small and bigger-ticket purchases, become 

employed, open bank accounts, sign leases, get their first credit cards, and grapple with paying 

for college. Thus, explicit financial knowledge and decision-making skills become increasingly 

personally relevant, perhaps for the first time in their lives. These new opportunities to earn, 

save, spend, and borrow money give youth the opportunities to hone their financial decisionmaking skills. In addition, teens start to learn and begin to make use of routine financial 
26 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

decision-making shortcuts, which we call rules of thumb. While teens are developing new 

knowledge and skills about money, how they apply that knowledge is influenced by the habits, 

attitudes, and executive function skills they have begun to develop in earlier stages. 

During the teen years, cognitive faculties continue to strengthen. This prepares teens and young 

adults to understand and use real-world and abstract financial knowledge and concepts, and to 

develop and practice financial research and decision-making skills. Youth at this stage can learn 

how to find and recognize reliable financial information and how to compare financial products. 

Research into adult financial well-being suggests these are critical skills.

To successfully navigate adult financial life, one needs to be able to do effective, purposeful 

financial research in order to analyze options and to be able to figure out how to execute on 

financial decisions. This set of skills, called financial ability, is a key element of adult financial 

literacy and capability.39

Executive function continues to mature during this developmental stage, but some aspects are 

fully formed as early as age 15. Adolescents consistently demonstrate a stronger orientation to 

the future than younger children do, and they tend to plan ahead more thoroughly and 

consistently.40 However, other executive function skills, like self-regulation and the ability to 

stay focused, seem to develop at a slower pace and do not reach maturity until early adulthood. 

Therefore, teens may display adult-level cognition in some settings but may have difficulty 

controlling impulses, particularly during highly tempting situations. For example, a teen may 

get an after-school job intending to save for a car, yet decide to dip into savings to pay for a 

concert ticket if friends are going. 

As they encounter new experiences, teens begin to develop more sophisticated strategies to 

 

39 For more information on the concept of “financial ability,” see section 4.2.1 of Financial well-being: The goal of 

financial education, Consumer Financial Protection Bureau (2015), available at 

consumerfinance.gov/reports/financial-well-being/.

40 Steinberg, Laurence, Sandra Graham, Lia O’Brien, Jennifer Woolard, Elizabeth Cauffman, and Marie Banich, Age 

Differences in Future Orientation and Delay Discounting, 80(1) Child Development 28–44 (2009).
27 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

assess and weigh decisions. By young adulthood, youth tend to have higher levels of self-control 

than they did as teens, in part because they have a stronger capacity to resist the pull of social 

and emotional influences and to focus on long-term goals.41

Financial independence typically increases as youth enter their teen years and begin to make 

consequential financial decisions on their own. This increases the salience of financial 

knowledge, skills, and decision-making abilities. For example, they may have learned about 

interest rates in a prior financial education class and now might be evaluating interest payments 

for a credit card, auto loan, or student loan.

Teens and young adults may engage in more formal money management and financial decisions 

with increasingly higher consequences as they gain real-world financial knowledge and 

familiarity with financial products and institutions. Through increased formal money 

management experiences, youth can develop and practice financial skills and decision-making 

strategies in relevant, real-life situations – preferably with guidance and feedback from 

knowledgeable adults in their lives. Any mistakes made within this safe environment can lead to 

valuable learning that creates a “frame of reference” for future financial decisions. This practice 

helps youth achieve greater financial capability. 

The financial decisions young adults make can help them build a positive financial future, or lay 

the groundwork for financial struggles. Establishing routines and rules of thumb can build teens’ 

financial self-confidence and their belief in their ability to successfully complete financial tasks 

(financial self-efficacy). Teens who have begun to develop financial self-efficacy are more likely 

to act on the financial knowledge and skills they have learned because they believe it will be 

worthwhile to do so. Less favorable results might be expected for those who head into young 

adulthood without having acquired the building blocks of financial capability and for those who 

lack guidance and support from knowledgeable adults. Without support and guidance, teens and 

young adults can head down a path of poor financial decisions that lead to worsening options 

and set off a spiral of financial disadvantage into adulthood. For example, a young adult can 

 

41 Romer, Daniel, Angela L. Duckworth, Sharon Sznitman, and Sunhee Park, Can Adolescents Learn Self-Control? 

Delay of Gratification in the Development of Control over Risk Taking, 11(3) Prevention Science 319–330 (2010).
28 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

open a credit card account, fall behind on monthly credit card payments, and end up with poor 

credit, especially if the young adult does not have the savings or resources to cushion those 

financial stumbles.

Schools are an important platform for helping teens improve their financial knowledge and 

decision-making skills. However, as of 2016, only 17 states require high schools students to pass 

a personal finance class in order to graduate.42 Youth employment programs can be another 

important platform for helping teens acquire some of the building blocks of financial capability. 

The CFPB and the Department of Labor are helping municipalities integrate financial 

knowledge and skill-building services into existing youth employment-training programs.43

As teens increasingly interact with the financial world and financial decision-making, they begin 

to develop routine rules of thumb they will rely upon to navigate their day-to-day financial lives 

as adults. A teen whose parents put $40 into a savings jar every payday might routinely set aside 

money when she earns her paycheck. Practicing financial behaviors and making and reflecting 

on deliberate financial decisions can help a teen develop these automatic decision-making skills. 

These routine behaviors can then become habits.

 

42 Survey of the States: The state of K-12 economic and financial education in the United States, Council for 

Economic Education (2016), available at http://councilforeconed.org/policy-and-advocacy/survey-of-the-states/.

43 For more information, see Getting young people on the path to financial success, Consumer Financial Protection 

Bureau (2014), available at consumerfinance.gov/about-us/blog/getting-young-people-on-the-path-to-financialsuccess/; see also Building financial capability in youth employment programs: Insights from a roundtable with 

practitioners, Consumer Financial Protection Bureau (2014), available at 

http://files.consumerfinance.gov/f/201408_cfpb_report_financial-capability-in-youth-employment-programs.pdf.
29 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Table 7, below, summarizes the primary and secondary elements of financial capability that 

develop during adolescence and young adulthood.

TABLE 7: WHAT HAPPENS IN ADOLESCENCE AND YOUNG ADULTHOOD (AGES 13−21) 

Primary

Financial knowledge and decision-making skills grow as they become more personally relevant

§ Knowledge and skills are strengthened through making and reflecting on 

consequential decisions

§ Support deliberate, intentional problem-solving

Secondary

Executive function continues to develop

§ Supports critical thinking, focus, and perseverance

Financial habits and norms continue to develop

§ Shortcuts for automating financial decisions crystallize with repeated experience

§ Habits and attitudes for managing money become part of individual identity

How it happens: pathways and platforms

§ Schools, formal instruction

§ Structured experiential learning44 activities

§ Real-life financial decisions, ideally guided by adult oversight

 

44 Experiential learning is the process of deriving meaning from direct or hands-on experiences. Experiential 

learning opportunities encourage children and youth to take initiative, make decisions, experience the results of their 

choices in a safe environment, and learn through reflection.
30 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Table 8, below, provides a checklist of financial capability milestones relevant to adolescence 

and young adulthood.

TABLE 8: CAPABILITY MILESTONES FOR ADOLESCENCE AND YOUNG ADULTHOOD

1. Executive function 2. Financial habits 

and norms

3. Financial knowledge and 

decision-making skills

§ Does the teen 

demonstrate criticalthinking skills?

§ Does the teen 

demonstrate future 

orientation?

§ Has the teen 

demonstrated the ability to 

plan ahead and delay 

gratification?

§ Does the teen have a positive 

attitude toward planning, 

saving, frugality, and 

self-control?

§ Does the teen demonstrate 

positive money management 

habits and decision-making 

strategies?

§ Can the teen make spending 

and saving decisions aligned 

with his or her goals and 

values?

§ Does the teen demonstrate 

appropriate financial selfefficacy?

§ Does the teen grasp 

advanced financial processes 

and concepts?

§ Can the teen successfully 

manage money or other 

resources to reach his or her 

own goals?

§ Can the teen identify trusted 

sources of information and 

process that information?
31 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

2.6 Why do developmental windows present 

the best opportunities for youth to 

acquire the building blocks of financial 

capability?

Every day as adults, we make financial decisions using money habits, norms, and rules of thumb 

(automatic mental shortcuts that simplify the decision-making process). Youth begin to develop 

those financial habits and ideas in early childhood. The CFPB’s financial capability 

developmental model describes how young people typically build the attitudes, habits, skills, 

and cognitive abilities that they will need to effectively manage their financial resources and 

achieve well-being as adults. This developmental model recognizes that youth gather the 

building blocks of financial capability over time as they grow and encounter new experiences. 

The model is fluid, reflecting the fact that individuals are unique and our social and 

environmental influences shape each of us.

The developmental model highlights the windows of opportunity when youth typically, and most 

readily, acquire the building blocks of financial capability. These touch points are periods during 

which individuals are typically developmentally capable of learning a skill or attitude and are 

most commonly open to learning it. The cognitive and environmental factors that together make 

a certain age ideal for absorbing a particular skill or behavior might not readily reappear again 

later in life, making these capabilities not nearly so easy to learn outside the window. In other 

words, developing the financial capability building blocks is much more difficult without the 

optimal alignment of internal readiness and external environmental learning conditions that 

typically occur during the developmental windows.

For example, teens who receive an allowance, and guidance in how to use it, may gain 

confidence in their ability to make spending decisions. Alternatively, teens who are never given 

an opportunity to discuss or make spending decisions may feel unprepared or nervous about 

money. Teens who stay on that cascade or pathway may grow up thinking they are bad with 

money, or they might habitually avoid making money decisions. Changing those beliefs and 

habits may be difficult once those teens become adults. Therefore, a timely youth program that 

helps them practice making spending decisions could start them on a path toward skillful money 

management. Instead of forming the habit of avoiding financial decisions, teens would instead 
32 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

develop a healthier financial belief, such as a confidence in making spending decisions aligned 

with their goals and values. 

This research stresses the importance of leveraging the developmental windows and the 

responsibility parents, caregivers, community organizations, and school leaders share as they 

work together to ensure that all youth have the opportunity to acquire the building blocks of 

financial capability. The recommendations provided in the following section are intended to 

orient a range of actors, including financial education program developers, schools, and policy 

and community leaders, toward a set of common strategies so that no one practitioner needs to 

tackle them all. For youth who may not be developing the building blocks at home through their 

parents or caregivers, schools, after-school programs, and community organizations can provide 

support and opportunities. Alternatively, youth who are not engaged in the school environment 

may develop the building blocks with support from community organizations and parents or 

caregivers. By working together, we can give all children opportunities to create a foundation for 

adult financial capability.
33 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3. Recommendations for 

applying the financial 

capability developmental

model

Previously, the CFPB stressed the importance of starting financial education early and 

continuing to build on that foundation throughout childhood and young adulthood, including 

requiring financial education in schools.45 Building on the earlier recommendations, the CFPB 

developed a set of four recommendations that program leaders, financial educators, 

policymakers, and other stakeholders can use to apply the financial capability developmental 

model in their work. The recommendations reflect the most promising financial capability 

strategies and approaches based on our research and analysis.46

The four recommendations are:

1. For children in early childhood, focus on developing executive function.

2. Help parents and caregivers to more actively influence their child’s financial socialization.

 

45 Transforming the Financial Lives of a Generation of Young Americans: Policy Recommendations for Advancing

K-12 Financial Education, Consumer Financial Protection Bureau (2013), available at

files.consumerfinance.gov/f/201304_cfpb_OFE-Policy-White-Paper-Final.pdf.

46 The research process underlying these recommendations is available in Appendix C.
34 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3. Provide children and youth with financial experiential learning opportunities.

4. Teach youth financial research skills.

Within each recommendation, you will find:

§ An explanation of why the recommendation helps build financial capability.

§ Examples from the field.

§ Potential strategies for putting the recommendation into place.

Each recommendation contributes to financial capability, but, when applied together, they can 

have a greater impact. Young people continually acquire and develop attributes and abilities that 

influence how they will navigate the financial challenges and opportunities they encounter as 

adults. Youth do not pick up the building blocks of financial capability separately or in isolation. 

The development of some building blocks of financial capability support and catalyze the 

development of others. For instance, improvements in executive function during early childhood 

lay the foundation for financial behaviors and skills people use later in life to plan and set goals.

To build the strongest possible base for adult financial capability and well-being, schools, 

parents, and policy and education leaders can work in concert to ensure that all children have 

the chance to acquire each of the building blocks. Introducing key financial education concepts 

early and consistently offering financial education throughout the K-12 years is critical. Parents 

and caregivers also contribute significantly when they prepare children and youth for skillful 

money management.47

The four recommendations illustrate ways to employ the developmental model in financial 

education and youth programs, policies, and initiatives, and also highlight promising strategies, 

approaches, and activities for youth. 

 

47 Transforming the Financial Lives of a Generation of Young Americans: Policy Recommendations for Advancing

K-12 Financial Education, Consumer Financial Protection Bureau (2013), available at 

files.consumerfinance.gov/f/201304_cfpb_OFE-Policy-White-Paper-Final.pdf.
35 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Financial education curriculum creators and program providers can use these recommendations 

to evaluate current offerings and as they produce and test new programs, lessons, and activities. 

Policy and community leaders can use the recommendations to promote developmentally 

appropriate financial education initiatives.

3.1 Recommendation one: 

For children in early childhood, focus on 

developing executive function skills

3.1.1 What is executive function?

The Center on the Developing Child at Harvard University defines executive function as “mental 

processes that enable us to plan, focus attention, remember instructions, and juggle multiple 

tasks successfully. Just as an air traffic control system at a busy airport safely manages the 

arrivals and departures of many aircraft on multiple runways, the brain needs this skill set to 

filter distractions, prioritize tasks, set and achieve goals, and control impulses.”48

3.1.2 Why is executive function important to financial 

capability?

People use executive function skills to set goals, plan, save for the future, and stick to a budget. 

Developing healthy executive function is especially important during the preschool years 

because it lays a critical foundation for further cognitive, attitudinal, and skill development 

during middle childhood and adolescence, and into young adulthood. Children between the ages 

 

48 To learn more about executive function, see Executive Function & Self-Regulation, Center on the Developing Child, 

Harvard University, available at http://developingchild.harvard.edu/science/key-concepts/executive-function/.
36 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

of 3 and 5 typically show dramatic growth in executive function skills. That suggests early 

childhood is a crucial developmental stage during which there is a window of opportunity to 

focus on executive function development.

3.1.3 Executive function in action

Research suggests that programs involving the frequent practice of executive function skills in 

multiple contexts have the greatest impact.49, 50 This would include programs that encourage 

children to plan and think ahead: for example, before a play session, asking children what toys 

they plan to use or which activity they plan to complete, and then, when playtime ends, asking 

them to evaluate how well they stuck to their plan. Interventions that become progressively 

more challenging over time, such as providing increasingly difficult puzzles or sing-along 

rhymes, also help develop executive function.51

While research suggests that early adversity, including poverty, abuse, and other stressors, may 

affect executive function development in young children, studies show that children with the 

poorest executive functioning exhibit the greatest improvement from interventions.52, 53, 54

 

49 Klingberg, Torkel, Elisabeth Fernell, Pernille J. Olesen, Mats Johnson, Per Gustafsson, Kerstin Dahlström, 

Christopher G. Gillberg, Hans Forssberg, and Helena Westerberg, Computerized Training of Working Memory in 

Children with ADHD—A Randomized, Controlled Trial, 44(2) Journal of the American Academy of Child and 

Adolescent Psychiatry 177–186 (2005).

50 Lillard, Angeline, and Nicole Else-Quest, Evaluating Montessori Education, 313 Science 1893–1894 (2006).

51 Diamond, Adele, Executive Functions, 64(1) Annual Review of Psychology 135–168 (2013).

52 Blair, Clancy, and C. Cybele Raver, Child Development in the Context of Adversity: Experiential Canalization of 

Brain and Behavior, 67(4) American Psychologist 309–318 (2012).

53 Tomalski, Przemyslaw, and Mark H. Johnson, The effects of early adversity on the adult and developing brain,

23(3) Current Opinion in Psychiatry 233–238 (2010).

54 Diamond, Adele, Activities and Programs That Improve Children’s Executive Functions, 21(5) Current Directions 

in Psychological Science 335–341 (2012).
37 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.1.4 Building executive function in a financial context

Helping children develop self-regulation, the ability to focus, and impulse control is likely to 

benefit them in a variety of different domains, including nutrition and health, public safety, and 

academic achievement.55 Likewise, generalized executive function will also help with financial 

capability even if financial topics are not used. However, teaching and practicing executive 

functions within financial contexts may better position youth to acquire other building blocks as 

they age, such as financial habits and norms or decision-making skills. 

Incorporating financial experiences and concepts into early childhood activities aimed at 

boosting executive function can therefore serve two related purposes. First, children can learn 

basic financial concepts such as working for pay, and trading, sharing, or spending money or 

resources. Second, they may begin to acquire rudimentary financial habits and norms as they 

watch parents and caregivers make financial decisions and transactions. 

Examples of executive function training in financial contexts include make-believe play 

activities, such as having children act out scenes in which they pretend to go to the bank, make a 

grocery list and go shopping, or get rewarded to run a business or do a job. Play-based learning 

activities work well because they help children develop self-regulatory skills while being actively 

engaged in an activity that interests them.56 An added benefit is that children who encounter a 

problem in a play-based environment show more flexibility and perseverance in their problemsolving.57

 

55 Moffitt, Terrie E., Louise Arseneault, Daniel Belsky, Nigel Dickson, Robert J. Hancox, HonaLee Harrington, Renate 

Houts, Richie Poulton, Brent W. Roberts, Stephen Ross, Malcom R. Sears, W. Murray Thomson, and Avshalom Caspi,

A gradient of childhood self-control predicts health, wealth, and public safety, 108(7) Proceedings of the National 

Academy of Sciences 2693–2698 (2011).

56 Whitebread, David, and Sue Bingham, Habit Formation and Learning in Young Children (London: Money Advice 

Service 2013).

57 Pellegrini, Anthony D., and Kathy Gustafson, The Nature of Play: Great Apes and Humans Boys’ and Girls’ Uses of 

Objects for Exploration, Play and Tools in Early Childhood (New York: Guilford Press 2005).
38 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

In addition to developing executive function, play-based activities also contribute to financial 

socialization. Preschool children can begin to understand concepts such as:

§ People use money to purchase things.

§ A person earns money by working.

§ Some people save money over time to purchase things later.

3.1.5 Executive function practices at home

The home is an important platform,58 and parents and caregivers are a critical pathway59 for 

providing activities that build executive function. Organizations that work with parents can 

share ideas and encourage parents to do age-appropriate activities with their children that 

involve making resource or financial management decisions, such as creating a budget or 

making trade-offs around consumption. Parents who engage their children in planning and 

decision-making lay the foundation for early financial socialization. Parents can convey and 

reinforce expectations about behaviors such as sharing or waiting to make purchases until one 

has saved enough money.

The Center on the Developing Child at Harvard University provides a number of activities that 

parents and caregivers can do with 3- and 5-year-olds to strengthen executive function, 

including imaginary play, storytelling, games and songs, and cooking together.60 These engaging 

activities help strengthen preschoolers’ ability to self-regulate and match their mental and 

physical actions to a larger goal.

 

58 Platforms are the locations or settings where youth engage in activities to develop and reinforce financial capability 

attributes and abilities. Major platforms include home, schools, and programs run by community organizations.

59 Pathways are the processes and experiences through which youth gain and develop the building blocks of financial 

capability. Major pathways include early experiences and environment, parental influence, financial socialization, 

experiential learning, and direct instruction.

60 Executive Function Activities for 3- to 5-year-olds, Center on the Developing Child, Harvard University, available 

at http://developingchild.harvard.edu/wp-content/uploads/2015/05/Executive-Function-Activities-for-3-to-5-yearolds.pdf.
39 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.2 Recommendation two: 

Help parents and caregivers to more 

actively influence their child’s financial 

socialization

3.2.1 What is financial socialization?

Financial socialization is an ongoing process by which children and youth develop the financial 

habits and norms that guide their financial behaviors as adults.61 Financial socialization occurs 

through many different pathways and platforms, including parents, caregivers, school, media, 

and peers. Financial socialization can happen from direct instruction from teachers or parents 

but is typically shaped by observing the behaviors and choices made by adults and peers in the 

child’s life.

3.2.2 Why is parent-driven financial socialization important 

to financial capability?

Parents and caregivers play a critical role in shaping the values, norms, and habits of their 

children, especially younger children.62 In elementary school, children observe their parents 

making day-to-day or month-to-month choices, such as paying bills, deciding what to buy at a 

grocery store, or discussing financial concerns or issues. Parental or caregiver guidance and 

oversight can play a significant role in setting standards and expectations, especially as children 

move into later childhood, the preteen years, and beyond.

 

61 Danes, Sharon M., Parental Perceptions of Children’s Financial Socialization, 5 Financial Counseling and Planning

127–146 (1994).

62 Ward, Scott, Consumer Socialization, 1(2) Journal of Consumer Research 1–14 (1974).
40 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.2.3 Financial socialization in action

Organizations can engage parents and caregivers as active participants in the financial 

socialization of their children, starting in preschool and continuing through adolescence. 

Children, especially at earlier ages, learn from observing adults’ interactions regarding money, 

as well as from direct, explicit instruction. Youth financial capability programs have 

opportunities to help parents take a more active role in their children’s financial socialization. 

Programs and educators can encourage parents and caregivers to help children develop healthy 

financial habits and norms by:

§ Involving children in appropriate family financial activities, such as setting a budget or 

making small spending decisions, and answering children’s questions about money 

topics.

§ Connecting parents and caregivers to services and resources that can help them improve 

their own financial capability and well-being so they are better able to model positive 

attitudes and behaviors for their children.

Organizations can also help parents and caregivers build confidence in their ability to share 

healthy financial habits and norms by emphasizing the importance of the financial skills and 

values that parents already possess through a “strengths-based” approach.

63

In early and middle childhood, children begin to develop financial habits and norms, making 

this a good window of opportunity for parents to teach and model financial behaviors. Teens 

may be more independent and increasingly make routine financial decisions on their own. 

During adolescence, teens begin to establish their own financial identities, based in large part on 

the attitudes and values they learned during early and middle childhood. Although attitudes and 

values take root in early and middle childhood, they continue to be refined through the teen and 

young adult years. Parents continue to play a role in reinforcing financial attitudes and 

 

63 A strength-based approach to financial education focuses on having parents first share the financial habits and 

norms they already possess, which can build parents’ confidence in their own ability to role model healthy financial 

habits and norms. It focuses first on what parents already know and what is
41 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

behaviors and setting expectations, but peers become an increasingly important influence on 

financial socialization, as both a source of support and a source of peer pressure. Even as 

children approach young adulthood, parents and caregivers are in a unique position to support 

the development of financial capability. 

Children do not develop financial habits and norms at a single point in time or around a single 

financial behavior. Instead, they gather attitudes and behaviors through exposure to financial 

behaviors, personal financial experiences, and financial education. Parents and other caregivers 

can play an instrumental role in their children’s financial socialization and cognitive 

development over many years. Programs working with parents will benefit from seeking out 

multiple touch points and viewing parental engagement as an ongoing process.

3.2.4 Leverage everyday activities to drive financial 

socialization

Programs can encourage parents and caregivers to view regular activities, such as dining out, 

buying gas, grocery shopping, and paying the monthly bills, as opportunities to discuss money 

and model financial behaviors with their children starting in early childhood. The goal of these 

interactions should be to impart healthy values and norms around financial behaviors, such as 

spending money wisely, saving, planning, and controlling impulses when it comes to money.

Parents can also:

§ Actively engage children in everyday financial behaviors.

§ Help develop children’s habits and decision-making rules of thumb through day-to-day 

teachable moments.

§ Encourage their children to make money choices in line with their own goals and values.

A number of CFPB resources and practical suggestions to support parents and caregivers in 

these efforts are available online at “Money as you grow” (consumerfinance.gov/money-as-yougrow).
42 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.2.5 Improve the financial well-being of parents and 

caregivers to support them as role models

There are a growing number of dual, or two-generation, programs focused on improving 

educational or health outcomes for children as well as economic outcomes for parents.64 By 

equipping parents or other primary caregivers with the knowledge and tools they need and 

connecting them with social supports, these programs help create home environments that 

encourage youths’ cognitive and social/emotional development. If the services also improve the 

financial capability of parents, these programs can help them model positive financial attitudes 

and behaviors for their children.

Some two-generation programs also help parents and caregivers improve interactions with their 

children. Studies have shown that trust and parental warmth affect the quality of parent-child 

interactions around money. In fact, the quality of parental interactions may be at least as 

important as the content of parental interactions.65, 66 Therefore, it may be particularly effective 

to include guidance around financial socialization in programs that focus on strengthening the 

parent-child relationship.

Two-generation approaches could have a powerful impact on the financial socialization of 

children. However, not all financial capability programs or initiatives have the experience or 

resources necessary to develop programming targeted at parents. Those lacking this option can 

look for ways to partner with other organizations that offer those services or resources to 

parents.

 

64 Mosle, Anne, and Nisha Patel, Two Generations, One Future: Moving Parents and Children Beyond Poverty 

Together, The Aspen Institute (2012), available at

aspeninstitute.org/sites/default/files/content/docs/ascend/Ascend-Report-022012.pdf. 

65 Maccoby, E. E., and J. A. Martin, Socialization in the Context of the Family: Parent-Child Interaction, Handbook 

of Child Psychology 1–103 (Hoboken, NJ: Wiley 1983).

66 Davidov, Maayan, and Joan E. Grusec, Untangling the Links of Parental Responsiveness to Distress and Warmth 

to Child Outcomes, 77(1) Child Development 44–58 (2006).
43 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

In a survey of parents and children, fewer than one in four parents felt confident in their ability 

to talk about finances with their children.67 This lack of confidence may be more pronounced in 

economically vulnerable families, where parents may feel that their own financial struggles 

diminish their ability to have positive financial discussions with their children.68

Using a strength-based approach to engage parents in financial socialization may help lower 

parents’ anxiety about discussing finances with their children. Strength-based approaches 

typically view individuals as being resourceful and resilient, and therefore these approaches seek 

to build on what parents and caregivers already know and what is important to them to help 

their children succeed.69 This means starting the engagement with topics parents are 

comfortable with and tasks they are good at, then providing suggested actions that build on their 

expertise and strengths.

Research suggests that even parents who struggle to make ends meet are successfully managing 

resources. In fact, a more in-depth view of the lives of economically vulnerable families shows 

they lead complex financial lives, often balancing and navigating multiple kinds of resources and 

income streams simultaneously.70 Thus, programs that facilitate parental engagement, 

especially with economically vulnerable families, should capitalize on this by focusing on 

parents’ success in “resource management” rather than on parents’ financial knowledge.

 

67 5th Annual Parents, Kids & Money Survey, T. Rowe Price (2013), available at

https://corporate.troweprice.com/Money-Confident-Kids/images/emk/2013-PKM-Survey-Results-Report-FINAL0326.pdf.

68 Van Campenhout, Geert, Revaluing the Role of Parents as Financial Socialization Agents in Youth Financial 

Literacy Programs, 49(1) Journal of Consumer Affairs 186–222 (2015).

69 Hammond, Wayne, Principles of Strength-Based Practice, Resiliency Initiatives (2010), available at

ayscbc.org/Principles%20of%20Strength-2.pdf.

70 Morduch, Jonathan, Timothy Ogden, and Rachel Schneider, An Invisible Financial Sector: How Households Use 

Financial Tools of Their Own Making, U.S. Financial Diaries (2014), available at usfinancialdiaries.org/issue3-

informal.
44 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.3 Recommendation three: 

Provide children and youth with 

experiential learning opportunities

3.3.1 What is experiential learning?

Experiential learning is the process of deriving meaning from direct or hands-on experiences. 

Experiential learning opportunities encourage children and youth to take initiative, make 

decisions, experience the results of their choices in a safe environment, and learn through 

reflection.

3.3.2 Why is experiential learning important for supporting 

financial capability?

Experiential learning opportunities support financial capability by allowing youth to acquire and 

practice financial decision-making skills and habits. Incorporating activities that build financial 

decision-making skills can help youth build confidence in their ability to successfully complete 

financial tasks in the real world.

3.3.3 Experiential learning in action

Children in all stages of development benefit when they have access to age-appropriate 

experiential learning opportunities because these experiences help children and youth build 

their financial knowledge and decision-making skills and foster their development of positive 

financial habits and rules of thumb. Effective experiential learning opportunities:

§ Support independent decision-making by providing guidance and opportunities for 

reflection.

§ Take advantage of teachable moments – opportunities to explain new information, 

values, norms, behaviors, or skills.

§ Provide opportunities for repeated practice.

§ Incorporate planning and goal setting.
45 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.3.4 Support independent decision-making by providing 

guidance and opportunities for reflection

When doing experiential activities, it is important that participants make independent financial 

decisions in a safe environment and then experience the results of their decisions. In this way, 

experiential activities help youth learn from their mistakes and successes. Both research and 

teachers’ experience suggest that experiential learning is most beneficial when the content is 

relevant and meaningful in the lives of students.71, 72

Providing children and youth with firsthand experiences alone does not necessarily ensure an 

effective learning experience, particularly if children are doing something for the first time. 

Providing guidance and opportunities for reflection are key to helping youth find their own way 

and learn from their choices.73, 74 Guidance and feedback while children practice financial 

behaviors increases the likelihood they will internalize the learning and use it to form financial 

habits and decision-making strategies.

How much help and feedback children need changes as they get older and gain increasing 

financial knowledge and skills. Teachers, parents, and other mentors can help teach positive 

financial behaviors using an instructional approach called scaffolding. This approach breaks 

down learning into small steps by reducing the frustration of learning a new skill. Scaffolding 

provides active guidance and modeling when needed early in the learning process. As the child 

masters each aspect of the new skill, the instructor gradually gives less support. This creates 

 

71 Fernandes, Daniel, John G. Lynch Jr., and Richard G. Netemeyer, Financial Literacy, Financial Education and 

Downstream Financial Behaviors, 60(8) Management Science 1861–1883 (2014).

72 Johnson, Elizabeth, and Margaret S. Sherraden, From Financial Literacy to Financial Capability Among Youth,

34(3) Journal of Sociology & Social Welfare 119–145 (2007).

73 Kolb, David A., Experiential Learning: Experience as the Source of Learning and Development (Englewood Cliffs, 

NJ: Prentice Hall 1984).

74 Laney, James D., Experiential Versus Experience-Based Learning and Instruction, 86(4) The Journal of 

Educational Research 228–236 (1993).
46 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

built-in opportunities for reflection and feedback as teachers and parents allow youth to make 

increasingly more independent decisions.75

As demonstrated in Figure 1, below, a new experiential learner needs a lot of direct, upfront 

instruction. As the student gains experience, the teacher can focus instead on providing 

feedback and opportunities to reflect on decisions and actions. For example, a financial 

education teacher working with a student who has no experience in selecting a financial product 

will need to begin with direct instruction on what factors to consider and where accurate 

information can be found on those factors. Once the student knows what factors to consider and 

where to get information on options, the teacher can ask the student to make a decision. Next, 

the teacher can ask the student to reflect on the results of her choices and what she might do 

differently next time.

FIGURE 1: SCAFFOLDING EXPERIENTIAL LEARNING

 75 Bransford, John D., Ann L. Brown, and Rodney R. Cocking, Ed., How People Learn: Brain, Mind, Experience, and 

School (Commission on Behavioral and Social Sciences and Education, National Research Council, Washington, DC:

National Academy Press 2004), available at nap.edu/catalog/9853/how-people-learn-brain-mind-experience-andschool-expanded-edition.
47 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.3.5 Take advantage of teachable moments

Research suggests that “just-in-time” financial education can be a promising method for 

influencing financial behavior.76 An example of “just-in-time” teaching would be learning about 

student loans and debt management when a student is thinking about how to finance college. 

Depending on the platform and pathway of the experiential learning, the instruction could be 

delivered in a variety of ways, including via the classroom, an after-school or community-based 

program, games or simulations, or interactions with parents or other mentors.

A majority of the experiential learning programs reviewed for this report used classroom-based 

financial education coupled with guidance or feedback. There are promising strategies that 

involve more-intensive approaches, including individual coaching for students in traditional 

financial education classes. Intensive strategies are most appropriate for teens and young adults 

who are making real-world financial decisions.

Experiential learning can also occur virtually or through simulations. An emerging example of 

simulations is “gamification,” which uses game mechanics to engage and motivate individuals 

toward specific actions. “Gamification” techniques leverage people’s natural desires for 

competition with others and for achievement (e.g., scoring points) in order to engage them. 

Another example of a simulation is a reality fair in which high school students confront some of 

the financial challenges they will experience when they start life on their own. In such a 

program, students visit booths where they must make financial decisions such as staying within 

their monthly earnings, paying bills, and dealing with temptations to spend. At the end of the 

activity, students reflect on their financial choices and experiences with a financial counselor.77

These learning opportunities allow youth to make independent decisions in safe environments 

and to learn from those firsthand experiences. Providing guidance and opportunities for 

 76 Fernandes, Daniel, John G. Lynch Jr., and Richard G. Netemeyer, Financial Literacy, Financial Education and 

Downstream Financial Behaviors, 60(8) Management Science 1861–1883 (2014).

77 Reality Fairs, The National Credit Union Foundation, available at ncuf.coop/how-we-help/realsolutions/experiential/reality-fairs.cmsx.
48 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

decision-making practice and reflection may help youth better learn and retain financial 

knowledge and skills. Schools that opt to offer experiential learning activities can play an 

important role in teaching youth decision-making skills.

3.3.6 Provide opportunities for repeated practice

To make experiential learning opportunities blossom into habits and well-informed rules of 

thumb, students need repeated opportunities for practice. The first time engaging in a behavior 

or making decisions involving new content requires planning and intentional thought. However, 

with practice and repeated experience engaging in similar financial behaviors, children and 

youth gradually adopt and automate those behaviors.78, 79, 80

Repeated and ongoing experiential learning can also result in a greater sense of self-confidence 

and self-efficacy in managing resources. Young adults are more likely to act on what they believe 

they know (self-confidence) and what they believe they can accomplish easily (self-efficacy) than 

on their actual financial literacy.81

3.3.7 Incorporate planning and goal setting

Allowing children and youth to manage resources in pursuit of a goal they set – whether or not it 

is financial in nature – is an important component of experiential learning. When children drive 

experiential learning activities, the lessons are more likely to be culturally and socially relevant 

 78 Lally, Phillippa, Cornelia H. M. van Jaarsveld, Henry W. W. Potts, and Jane Wardle, How are habits formed: 

Modelling habit formation in the real world, 40 European Journal of Social Psychology 998–1009 (2010).

79 Verplanken, Bas, Beyond frequency: Habit as mental construct, 45(3) British Journal of Social Psychology 639–

656 (2006).

80 Wood, Wendy, and David T. Neal, A New Look at Habits and the Habit-Goal Interface, 114(4) Psychological 

Review 843–863 (2007).

81 Serido, Joyce, Soyeon Shim, and Chuanyi Tang, A developmental model of financial capability: A framework for 

promoting a successful transition to adulthood, 37(4) International Journal of Behavioral Development 287–297 

(2013).
49 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

to the individual. Practice setting short- and long-term goals not only develops positive financial 

habits but also enhances existing executive function by promoting future orientation.

Practice can strengthen goal setting, planning, and follow-through skills. Goal setting, and 

creating plans and timelines to achieve goals, can be incorporated into many types of 

experiences.

The home environment is another platform in which experiential learning can be promoted. 

Organizations serving parents and caregivers who are not confident in their own financial 

abilities can use experiential learning activities focused on, for example, goal setting rather than 

more traditional money management topics. By allowing parents to decide which goals they 

would like to discuss and work on with their children, programs may be able to encourage 

further experiential learning opportunities.

3.3.8 Experiential learning examples from the field for 

children in middle childhood (ages 6−12)

Financial socialization of younger children happens primarily through interactions with parents 

and caregivers, which makes activities at home a natural platform for experiential learning. 

Getting an allowance, for example, gives children opportunities to practice day-to-day money 

management and financial decision-making strategies. Giving an allowance creates 

opportunities for parents to provide financial advice and encourage children to reflect on their 

choices. Research shows that receiving an allowance, combined with parental oversight and 

talks about budgeting and saving, has a greater impact on adult savings behaviors than just 

getting an allowance.82

School- and community-based programs are also important platforms for providing meaningful 

experiential learning opportunities. This is particularly true for economically vulnerable or 

 82 Bucciol, Alessandro, and Marcella Veronesi, Teaching children to save: What is the best strategy for lifetime 

savings? 45(C) Journal of Economic Psychology 1–17 (2014).
50 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

disadvantaged children and youth. At younger ages, financial simulations that reward children 

for managing tangible resources in the classroom are promising strategies for experiential 

learning in a protected, supervised environment.

Bank-in-school programs can provide ongoing opportunities to practice making financial 

decisions, particularly if they incorporate guidance and encourage children to reflect on their 

experiences. To incorporate experiential learning, schools can partner with a bank or credit 

union to provide a branch inside the school. This allows students who are “customers” to 

establish short- or long-term savings goals, develop plans to achieve those goals, and reflect on 

how well they are staying on track with their goals.

Entrepreneurship programs, which give youth opportunities to create business plans, set sales 

goals, track their sales, and, in the process, earn and manage money, are another platform for 

experiential learning.

3.3.9 Experiential learning examples from the field for teens 

and young adults (ages 13−21) 

When teens start jobs or internships, they are exposed to new platforms where they may acquire 

new financial experiences. A number of promising program models connect teens and young 

adults to employment opportunities. These programs help them earn and manage money, 

connect them to financial institutions, and offer financial lessons. When coupled with mentoring 

services or academic support, these programs provide a platform and pathway for teens and 

young adults to acquire effective financial habits and norms and experiential lessons.

Emerging strategies combine the delivery of financial knowledge with the development of 

positive personal financial habits. Some of these programs use smartphone apps to spur positive 

financial behaviors by setting challenges and tracking progress.
51 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

3.4 Recommendation four: 

Teach youth financial research skills

3.4.1 What are financial research skills?

Most major financial decisions that adults make (e.g., higher education financing, 

homeownership, retirement planning) require them to gather financial information through 

research, use the information to consider trade-offs, and act on that information in a way that 

serves their life goals. 

Helping youth to build financial research skills means:

§ Equipping youth with the knowledge and skills they need to find and evaluate relevant 

financial information.

§ Helping youth develop mental “guideposts” that prompt them to recognize situations in 

which they should seek out additional information.

3.4.2 Why are financial research skills important for 

supporting financial capability?

The ability to do financial research makes youth more flexible and adaptable consumers who are 

able to navigate changing financial markets and situations over their life course. Building 

financial research skills goes hand in hand with the notion that financial education in 

adolescence and young adulthood should focus on providing “just-in-time” information. Teens 

would likely find a lesson on comparing cellphone costs more relevant than one on comparing 

mortgage costs. Yet, the financial research skills involved in comparison shopping cellphone 

plan costs, including financial research and analysis, can easily transfer to decisions they may 

make later in life, including shopping for a car loan or mortgage.

Furthermore, research suggests that knowledge of how to do purposeful financial research and 
52 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

analysis of options, coupled with the knowledge of how to execute financial decisions, may be 

the type of knowledge most likely to support financial well-being.83

3.4.3 Financial research skills in action

Teaching financial research skills should begin in middle childhood and continue into 

adolescence and young adulthood. Promising strategies for teaching financial research skills 

foster critical thinking and provide opportunities for practice, which in turn help youth develop 

mental “guideposts” that support sound decision-making practices.

The ability to make sound financial decisions relies on two distinct elements:

1. The critical-thinking skills fueled by executive function, which allow one to perform 

research and analysis.

2. Knowledge of factual information relevant to the decision.

One strategy to help youth build these mental “guideposts” for financial decision-making is 

using case studies to illustrate common situations or decisions, especially ones that would lead 

many people to make mistakes. For example, a case study might teach youth that it is important 

to check their budget and comparison shop before purchasing an expensive item. In this case, 

expensive items serve as the mental “guidepost” to trigger youth to do more research and 

consult their own budget. Most people are unable to constantly monitor their own behavior but 

instead rely on cognitive heuristics84 (also known as decision-making shortcuts, or rules of 

thumb) to recognize situations in which they are likely to make a mistake.85

It can be easier to recognize other people’s mistakes than our own, especially if we lack a 

 

83 Financial well-being: The goal of financial education, Consumer Financial Protection Bureau (2015), available at

consumerfinance.gov/reports/financial-well-being/.

84 Cognitive heuristics are mental shortcuts we use to quickly make decisions or resolve challenges when we have 

limited information.

85 Kahneman, Daniel, Thinking, Fast and Slow (New York: Farrar, Strauss, Giroux 2013).
53 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

foundation of experience to draw upon. Thus, case studies can be especially useful, as they 

prompt youth to recognize when they are likely to need more help.

Another strategy to build financial research skills is to provide youth with opportunities to 

conduct financial research. Exercises that guide them through the step-by-step process of 

seeking information, determining its validity, and weighing the available options to see which 

best fits their needs can help produce savvy, confident consumers.

Exercises might include helping youth research and comparison shop the options available 

when they pay for college, buy a car, rent an apartment, or choose a cellphone plan. Youth will 

need assistance, coaching, and advice as to which options best fit their needs. These types of 

exercises enhance young people’s critical-thinking skills and build a foundation of experiences 

they can draw upon for future decisions. Schools are an excellent platform for delivering this 

practice. Financial scenarios offer opportunities to deliver hands-on experience applying math 

concepts to real life, such as comparison shopping interest rates.

It can also be valuable to look for ways to combine pathways, for example, by building financial 

research skills lessons into experiential learning activities. Youth who learn to apply skills in a 

variety of situations may find it easier to transfer skills from a situation in an experiential 

learning activity to a future financial situation. Connecting activities can also increase the 

relevance of research exercises. For example, in a goal-setting activity, organizations can easily 

insert research exercises into the step where the teen creates a plan to achieve the goal.
54 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

4. Conclusion

Understanding how consumers navigate their financial lives is essential to helping people grow 

their financial capability over the life cycle. The financial capability developmental model 

described in this report provides new evidence-based insights and promising strategies for those 

who are seeking to create and deliver financial education policies and programs. 

This research reaffirms that financial capability is not defined solely by one’s command of 

financial facts but by a broader set of developmental building blocks acquired and honed over 

time as youth gain experience and encounter new environments. This developmental model 

points to the importance of policy initiatives and programs that support executive functioning, 

healthy financial habits and norms, familiarity and comfort with financial facts and concepts, 

and strong financial research and decision-making skills. 

The recommendations provided are intended to suggest actions for a range of entities, including 

financial education program developers, schools, parents, and policy and community leaders, 

toward a set of common strategies so that no one practitioner needs to tackle them all. 

The CFPB is deeply committed to a vision of an America where everyone has the opportunity to 

build financial capability. This starts by recognizing that our programs and policies must 

provide opportunities that help youth acquire all of the building blocks of financial capability: 

executive function, financial habits and norms, and financial knowledge and decision-making 

skills. 

The CFPB is also committed to engaging with others who are working in this arena to ensure 
55 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

that all children and youth have access to evidence-based, age-appropriate, and developmentally 

appropriate financial education. We are starting by leveraging these research findings to inform 

the financial education tools and resources that we provide to parents and educators. Some 

examples of this include “Money as you grow” and “Personal finance teaching pedagogy.”86, 87

The CFPB is committed to promoting these findings to a variety of policy and community 

leaders working to advance financial education in states and nationally. For more information 

on the CFPB’s financial capability resources for youth, please visit us at 

consumerfinance.gov/youth-financial-education. 

 

86 Money as you grow, Consumer Financial Protection Bureau (2016), available at consumerfinance.gov/money-asyou-grow.

87 CFPB personal finance teaching pedagogy, Consumer Financial Protection Bureau (2016), available at

http://files.consumerfinance.gov/f/documents/092016_cfpb_YouthFinEdPedagogy.pdf.
56 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

APPENDIX A:

Youth capability milestones 

summary

The following table summarizes capability milestones at different developmental stages for the 

three financial capability building blocks:

1. Executive function.

2. Financial habits and norms.

3. Financial knowledge and decision-making skills.

It also shows the adult financial behaviors and characteristics related to financial well-being that 

are supported by each of the three building blocks of financial capability.

This is not a description of what is necessarily typical for all children in these age ranges. Rather, 

it provides information on the abilities and attributes that a young person would have in a 

best-case scenario, as a way to conceptualize the potential outcome goals of youth financial 

education programming.
57 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

TABLE 9: SUMMARY OF YOUTH CAPABILITY MILESTONES AND THEIR RELATIONSHIP TO ADULT 

OUTCOMES

Executive function Financial habits and norms Financial knowledge and 

decision-making skills

Early 

childhood

(ages 3−5)

§ Begins to 

demonstrate selfregulation, 

persistence, and 

focus

§ Can use these 

qualities when using 

and managing 

limited resources 

like time, money, 

treats, or belongings

§ Has begun to develop basic 

values and attitudes around 

keeping (saving) and using 

(consuming) resources 

§ Has early numeracy 

skills like counting and 

sorting

§ Grasps very basic 

financial concepts like 

money and trading

Middle 

childhood 

(ages 6−12)

§ Shows the ability to 

plan ahead and 

delay gratification

§ Shows future 

orientation

§ Has begun to develop a 

positive attitude toward 

planning, saving, frugality, 

and self-control

§ Has begun to show positive 

financial habits, like 

planning and saving

§ Can make spending and 

saving decisions aligned 

with his or her goals and 

values

§ Is self-confident about 

completing age-appropriate 

financial tasks

§ Understands core basic 

financial concepts and 

processes

§ Has successfully 

managed money or 

other resources to 

reach his or her own 

goals
58 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Executive function Financial habits and norms Financial knowledge and 

decision-making skills

Adolescence 

and young 

adulthood 

(ages 13−21)

§ Demonstrates 

critical-thinking 

skills

§ Demonstrates 

future orientation

§ Demonstrates the 

ability to plan 

ahead and delay 

gratification

§ Has a positive attitude 

toward planning, saving, 

frugality, and self-control

§ Shows positive money 

management habits and 

decision-making strategies

§ Can make spending and 

saving decisions aligned 

with his or her goals and 

values

§ Is self-confident about 

completing age-appropriate 

financial tasks

§ Grasps advanced 

financial processes and 

concepts

§ Can successfully 

manage money or 

other resources to 

reach his or her own 

goals

§ Can identify trusted 

sources of financial 

information and 

accurately process that 

information

Adult 

capabilities 

§ Sets goals and 

makes concrete 

plans to meet them

§ Can control 

impulses and think 

creatively to 

address 

unexpected 

challenges

§ Completes tasks 

set for oneself, 

perseveres in the 

face of obstacles

§ Makes financial decisions in 

light of his or her own 

standards rather than in 

comparison to other people 

(i.e., has internal frame of 

reference)

§ Believes in his or her own 

ability to manage money 

and achieve financial goals 

(i.e., has financial selfefficacy)

§ Has effective routine money 

management habits 

§ Knows when to seek 

out, and where to find, 

reliable information to 

make a financial 

decision

§ Knows how to process 

financial information to 

make sound financial 

decisions

§ Knows how to execute 

financial decisions, 

including monitoring 

and adapting as 

necessary to stay on 

track

§ Follows through on 

financial decisions
59 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

APPENDIX B:

Understanding Financial 

Well-Being 

The CFPB’s prior research into adult financial well-being produced hypotheses about the 

personal factors – certain knowledge, behavior, and personal traits – that would help people 

achieve greater financial well-being as adults.88 Factors beyond an individual’s control, such as 

structural opportunities, macroeconomic context, and family resources, of course play a 

significant role in financial outcomes and serve as critical enablers of an individual’s ability to 

use the financial skills they have developed. However, our research has focused on the areas 

where financial education efforts can most help to empower consumers – on the knowledge, 

skills, attitudes, and behaviors that may be influenced by financial education and other decisionmaking supports. 

In addition to socioeconomic factors and opportunities, these personal drivers of adult financial 

well-being include deliberate behaviors such as engaging in financial research, setting financial 

goals and making concrete plans to meet them, and following through on financial decisions, all 

of which require the factual knowledge and financial skills or know-how to do well. Effective, 

routine money management is another behavioral driver of financial well-being in adulthood. 

Unlike the analytical and planning skills needed for deliberate financial decision-making, 

effective navigation of day-to-day financial life requires healthy money habits, norms, and rules 

of thumb. Adults with higher levels of financial well-being also seem to have some notable 

 

88 See Financial well-being: The goal of financial education, Consumer Financial Protection Bureau (2015), 

available at consumerfinance.gov/reports/financial-well-being/, for a full description of research methods and 

findings related to adult drivers of financial well-being.
60 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

personal traits and attitudes. These include impulse control and the ability to delay gratification 

in service of future rewards, perseverance in the face of obstacles, belief in their ability to 

manage money and achieve financial goals (financial self-efficacy), and a tendency to make 

financial decisions in light of their own standards rather than in comparison to other people 

(internal frame of reference).

Table 10, below, lists the hypothesized personal drivers of adult financial well-being that were 

included in the CFPB’s research. 

TABLE 10: HYPOTHESIZED PERSONAL DRIVERS OF ADULT FINANCIAL WELL-BEING

Financial behaviors

Effective routine money management, which encompasses often unconscious habits, intuitions, 

and decision-making shortcuts (heuristics)

Financial research and knowledge seeking, which support purposeful, informed financial 

decision-making

Financial planning and goal setting, which give purpose and structure to individual financial 

decisions

Following through on financial decisions, the final step between intentions and desired 

outcomes

Financial ability

Knowing when and how to find reliable information to make a financial decision

Knowing how to process financial information to make sound financial decisions

Knowing how to execute financial decisions, adapting as necessary to stay on track

Personal traits

Comparing yourself to your own standards, not to others (internal frame of reference)

Being highly motived to stay on track in the face of obstacles (perseverance)

Having a tendency to plan for the future, control impulses, and think creatively to address 

unexpected challenges (executive functioning)

Believing in your ability to influence your financial outcomes (financial self-efficacy)

Source: Financial well-being: The goal of financial education, Consumer Financial Protection Bureau (2015), available 

at consumerfinance.gov/reports/financial-well-being/.
61 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

APPENDIX C:

Methodology

There are two separate but related streams of research underpinning the findings outlined in 

this report. The first stream explored the developmental origins of financial capability and 

resulted in the creation of a financial capability developmental model. The second stream 

developed a set of recommendations for applying the developmental model in youth programs.

The research team that conducted both streams of research was led by the Corporation for 

Enterprise Development, under contract to the CFPB. The team included academic experts in 

financial capability, as well as educational and developmental psychology, from the University of 

Wisconsin–Madison and the University of Maryland, Baltimore County, as well as ICF 

International.

Creating the developmental model of financial capability

The research process to identify the developmental origins of financial capability took as its 

starting point the findings of the CFPB’s prior research into personal factors that seem to 

support adult financial well-being. These adult abilities, attributes, and behaviors (summarized 

in Appendix B) formed the basis of the adult financial capability construct to which this research 

sought to uncover the developmental origins. The methodology to create the developmental 

model then consisted of three stages of investigation:

§ Analysis of the coded interview transcripts from the CFPB’s previous adult financial wellbeing research to understand experiences in youth that contribute to financial identities 

and values.

§ Extensive review of published research.

§ Consultation with national experts representing perspectives from a variety of 

disciplines.
62 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

In the first stage of this research stream, the research team analyzed approximately 1,600 pages 

of consumer and practitioner interview transcripts from the CFPB’s previous research on adult 

financial well-being.89 The analysis investigated themes and trends indicating experiences in 

youth that contributed to individuals’ financial identities and values.

In stage two, the researchers investigated what is known, and what is not yet understood, in 

published academic research about how and when children and youth acquire and develop 

financial capability, with a particular focus on the fields of consumer science, developmental 

psychology, and education. The researchers focused specifically on the personal drivers of 

financial well-being that may be influenced by financial education and other decision-making 

supports, while remaining aware that factors beyond an individual’s control can play a 

significant role in financial outcomes. The researchers also sought to gain insight into moments 

during youth development when learning events and activities are likely to have the greatest 

impact.90

Finally, in stage three, the research team consulted with 18 academic experts in child and 

adolescent development, education, financial capability, and consumer sciences to gain 

additional insights not yet reflected in published literature.

Based on these three stages of investigation, the research team developed a set of hypotheses 

about the attributes and abilities that develop throughout childhood and youth that serve as 

precursors to the behaviors, knowledge, skills, and personal traits that our prior research 

suggests drive financial well-being in adulthood. We refer to this collection of attributes and 

abilities, as well as insight into when and how they develop, as the financial capability 

developmental model.

 

89 Details on these interviews are available in Financial well-being: The goal of financial education, Consumer 

Financial Protection Bureau (2015), available at consumerfinance.gov/reports/financial-well-being/.

90 To read the full review of research, see Drever, Anita I., Elizabeth Odders-White, Charles W. Kalish, Nicole M. ElseQuest, Emily M. Hoagland, and Emory N. Nelms, Foundations of Financial Well-Being: Insights into the Role of 

Executive Function, Financial Socialization, and Experience-Based Learning in Childhood and Youth, 49 (1) (Spring 

2015) Journal of Consumer Affairs 13–38, available at http://onlinelibrary.wiley.com/doi/10.1111/joca.12068/full.
63 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

Developing the recommendations for applying the 

developmental model

Following the creation of the developmental model, the CFPB and the research team created a 

set of recommendations that apply the model to strategies to support children and youth. These 

recommendations were created by first documenting trends in existing strategies and programs 

and then conducting a gap analysis of existing practices in light of the developmental model. 

This approach uncovered existing practices that seem promising, as well as opportunities to fill 

gaps in the types of programming currently available to support youth in the development of key 

building blocks of financial capability.

First, the research team conducted a field scan of over 200 existing programs and practices in 

the fields of youth financial education and youth development. The objective of the field scan 

was to document and analyze trends in existing strategies and programs. Second, the team 

consulted with approximately two dozen experts in youth financial education and related fields 

through interviews and a convening. The expert interviews were designed to better understand 

how existing strategies may impact youth, as well as potential modification and changes that are 

inspired by the developmental model.

These activities shed light on a highly diverse field of programs and strategies, spanning from 

two-generation programs working with young children to municipal government summer 

employment programs working with high school students. As a final step, the team conducted a 

gap analysis of existing practices in light of the developmental model to pinpoint any key 

elements of the model that did not appear to be present in current programs and practices.

The financial capability developmental model, itself informed by extensive literature review and 

expert consultation, as well as the subsequent research on existing and potential practices, 

provides the foundation for the recommendations for promising strategies to help children and 

youth acquire the building blocks of financial capability at key developmental stages.
64 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

APPENDIX D:

Definition of key terms

DEFINED TERM DEFINITION

COGNITIVE FLEXIBILITY

Cognitive flexibility is the ability to think of different ways to solve a 

problem. It is a component of executive function that allows us to think 

creatively to address unexpected challenges.

COGNITIVE HEURISTICS Cognitive heuristics are mental shortcuts we use to quickly make 

decisions or resolve challenges when we have limited information.

DECISION SHORTCUTS

Decision shortcuts are routine responses we use to quickly make 

decisions or resolve challenges when we have limited information. 

Synonym for cognitive heuristics (see cognitive heuristics endnote 

below).

DELAYED 

GRATIFICATION

Delayed gratification is the willingness to forgo or postpone an 

immediate reward or benefit in favor of a future benefit. Along with a 

future orientation and impulse control, it supports self-regulation.

EXPERIENTIAL 

LEARNING

Experiential learning is the process of deriving meaning from direct or 

hands-on experiences. Experiential learning opportunities encourage 

children and youth to take initiative, make decisions, experience the 

results of their choices, and learn through reflection.
65 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

FINANCIAL SELFEFFICACY

Financial self-efficacy is confidence in one’s ability to manage finances 

and achieve financial goals without being overwhelmed, such as 

sticking to a spending plan.

FINANCIAL 

SOCIALIZATION

Financial socialization occurs when youth pick up financial attitudes, 

habits, and norms from observing financial behaviors of parents, peers, 

educators, media, or other influencers.

FUTURE ORIENTATION Future orientation is having a long-term outlook and believing that there 

will be opportunities for you in the years ahead.

PATHWAYS

Pathways are the processes and experiences through which youth gain 

and develop the building blocks of financial capability. Major pathways 

include early experiences and environment, parental influence, financial 

socialization, experiential learning, and direct instruction.

PLATFORMS

Platforms are the locations or settings where youth engage in activities 

to develop and reinforce financial capability attributes and abilities. 

Major platforms include home, schools, and programs run by 

community organizations.

PERSEVERANCE Perseverance is the willingness to continue doing something that is 

difficult or that you failed at before.

RULES OF THUMB

Rules of thumb are automatic, “go-to” responses we have to particular 

environmental cues that simplify the decision-making process and yield 

a reliably “good enough” solution. Also called cognitive heuristics, rules 

of thumb are mental shortcuts we use to quickly make decisions or 

resolve challenges when we have limited information (see cognitive 

heuristics endnote below).
66 BUILDING BLOCKS TO HELP YOUTH ACHIEVE FINANCIAL CAPABILITY

SELF-REGULATION

Self-regulation, in the context of financial capability, is the ability to 

understand and control your impulses, behavior, feelings, and thoughts 

in financial situations, and to respond wisely when facing financial 

challenges, for example, by persevering, or by delaying gratification 

(see cognitive heuristics endnote below).

STRENGTH-BASED 

APPROACH

A strength-based approach to financial education focuses on having 

parents first share the financial habits and norms they already possess, 

which can build parents’ confidence in their own ability to role model

healthy financial habits and norms. It focuses first on what parents 

already know and what is important to them, and suggests actions that 

are easy for them to complete before moving on to new financial 

concepts.

WORKING MEMORY

Working memory is the ability to hold onto and process several pieces 

of information at once. In the context of building blocks of financial 

capability, it’s used in executive function when we briefly store and 

recall information to compare options and make decisions.