Teach Your Kids About Money And Reap The Rewards
Here’s a (lengthy) excerpt from the Jump$tart Coalition For Personal Financial Literacy’s “Making The Case For Financial Literacy” report:
Adults and Parents:
A 2007 survey by The Hartford Financial Services Group, Inc. found that:
- The majority of college students say they learn the most about personal finance from their parents, but less than half of students say their parents make a consistent conscientious effort to teach them.
- Nearly two-thirds (63%) of the parents surveyed say they definitely see personal finance education as their responsibility and consistently make the effort to teach their children about it, compared to the only 41% of students who say their parents did.
- About 70% of college students cite parents as their primary source of information.
- Students and parents agree that college students are not well prepared to deal with the financial challenges that lie ahead. Less than one-quarter of students (24%) and only 20% of parents say students are very well prepared to deal with the financial challenges that await them after graduation.
- More than three-quarters of students (76%) wish they had more help preparing for their financial future.
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The 2006 annual back-to-school survey from Capital One found that:
- 49% of teens are eager to learn more about money management, but only 14% have taken a class on the topic – 35% would like to learn from their parents. When asked about the topics they’d most like to learn about, teens express interest in checking accounts, budgeting, investing, saving, and financing for large purchases.
- Only 18% of parents are discussing back to school budgeting – a decline from the 24% who did so last year.
- 79% of parents see themselves as positive money role models for their kids, yet only a small percentage are taking advantage of day-to-day learning opportunities to arm their teens with practical money skills.
- Only 43% of parents have discussed the importance of needs versus wants, compared to 64% who did so last year; and a surprising 42% of parents have not taken any steps whatsoever to discuss financial basics.
According to a July 2005 survey of 1,000 Parents of High School students by Visa:
- Parents rank developing good personal financial skills and being able to handle their money (74%) ahead of both following the wrong crowd (58%) and drugs/alcohol use (56%) in terms of concerns parents have for their children’s futures. Only personal safety ranked higher (89%).
- 53% of parents agree that their child thinks “money grows on trees.”
- 76% of parents surveyed said their high school student does not have a budget.
- Over half of the parents surveyed, 63%, require their working teens to save at least some of what they earn.
- 88% of parents feel it’s important to monitor their child’s spending and guide their money use.
- Only 32% of parents said their family will have an itemized back-to-school budget.
- Some 70% of parents surveyed said their child has not had any formal training in money management, either in school or outside the home. Additionally, 76% said that schools should be required to teach money management skills.
A July 2005 national survey by Consumer Action and Capital One found that:
- 65.1% of Americans consider themselves “very” or “highly” knowledgeable when it comes to personal finance. However:
- A majority of Americans (52%) do not regularly review their credit report each year. 23% of Americans have never reviewed their credit report.
- More than one-third (36.1%) of Americans report that they do not use a budget to manage their family’s expenses.
- Younger Americans are more inclined to use a budget compared to older Americans. Nearly 80% (79.7) of 18-19 year olds use a budget, compared to only 46.6% of Americans aged 70+ (plus).
This got me thinking. How does someone educate their kids about personal finance and teach them sound money management skills when their own finances are (most of the time) in precarious shape? Teaching kids to use a ledger to track their allowance and personal expenses is one of the best ways. Family Education lists 15 other ways to teach kids about money:
- As soon as children can count, introduce them to money.
- Communicate with children as they grow about your values concerning money
- Help children learn the differences between needs, wants, and wishes
- Setting goals is fundamental to learning the value of money and saving.
- Introduce children to the value of saving versus spending.
- When giving children an allowance, give them the money in denominations that encourage saving.
- Take children to a credit union or bank to open their own savings accounts.
- Keeping good records of money saved, invested, or spent is another important skill young people must learn.
- Use regular shopping trips as opportunities to teach children the value of money.
- Allow young people to make spending decisions.
- Show children how to evaluate TV, radio, and print ads for products. (Excellent post from Get Rich Slowly)
- Alert children to the dangers of borrowing and paying interest.
- When using a credit card at a restaurant, take the opportunity to teach children about how credit cards work.
- Be cautious about making credit cards available to young people, even when they are entering college.
- Establish a regular schedule for family discussions about finances.
Taking these steps will help you arm your kids with valuable money management skills. It’s also more than likely that it will force you to “step up your game” when handling your own finances. Kids are very observant, and making them a part of family finances will trigger unexpected questions (for example if you overspend one month and have to tighten up on the next month, they WILL ask why are we spending less on such and such). In the end, not only will they be better prepared for adult life, but your own finances will most likely be a lot healthier.
April 14th, 2008 at 3:00 am
I’m all for teaching your kids about finance. This is something that nobody does but everybody should.
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