Time To Break The Financial Circle of Dumbness

January is Financial Wellness Month, Great Time To Breakout

In Blog by Mike Prusinski

When it comes to understanding your financial world and how you got here, it’s very easy to blame some people who were supposed to have you better prepared. To name a few, you’ve had teachers, parents, employers, friends, your bank and grandparents who could have stepped up and provided some vital information to make your financial journey much easier. If you’ve ever thought – “I wish I would have known that growing up”, when it comes to something dealing with money, you’re not alone.

According to Financial Literacy Around the World, a Standard and Poor’s Rating Services Survey, the U.S. ranks 14th in financial literacy behind many smaller nations. It’s not surprising that other countries are doing it better when you consider other statistics about U.S. financial habits.

  • Nearly 60 percent of investors ages 18 to 34 say they already have taken money from their retirement account,
  • 77% of Americans live in states that scored a D or F grade in personal finance comprehension. Add to that, over half of states don’t require kids to take a personal finance course while in school,
  • 67% of American’s don’t have $1000 in savings.
  • The average American has over $5,000 in credit card debt.

The facts and figures from our financial failures are well documents and it’s what we call the “Circle of Dumbness”. The “Circle” is a never-ending pattern of things we just keep doing repeatedly hoping that it will get better. Guess what? It won’t! We need to break the “Circle of Dumbness” by doing things differently and accepting that our kids need to be better prepared. So let’s stop blaming all those who have helped us fail, and do what needs to be done so our kids can address the financial decisions they have to face.

2019 needs to be the year where family members help keep each be accountable, parents instill good work and money habits in their kids, and everyone opens their eyes to the reality that our kids won’t just learn this on their own. The “Circle” can be broken but it won’t be easy. You’ll need to do some things differently, be committed and get your kids involved. Here are some ideas that could help your family break the Circle of Dumbness!

Pick The Right Plastic

A recent survey of 1000 consumers showed that 88% used a debit or credit card when making most purchases. It’s true that sometimes cash can be less convenient and it can be harder to keep track of where you are spending your money, but using a credit card all the time can really add up if you don’t pay the bill. If you’re using plastic, choose your debit card as much as possible. Since it’s “real time spending”, you’ll be able to manage your money better, as well as, not be surprised by a growing credit card payment each month.


Invest Something … Anything

According to Gallup in 2016 only 52 percent of U.S. adults owned stock, including individual stock, a stock mutual fund or a self-directed 401(k) or IRA. You don’t have to be incredibly wealthy to be an investor. There are even programs that allow you to invest by rounding up purchases off debit cards. Start small but invest something each month. It’s also critical to get your kids involved in investing as well so they aren’t afraid. Since it’s probably new to both of you, do it together!


Use Your Internal Workforce

Americans spend an average of $2,000 a year for someone to handle a project that might be handled by another workforce – your kids. Whether it’s basic landscaping, shoveling snow, cleaning the house or skimming the pool, paying someone else to do these projects add up quick. It could be better to put the “home team” on the projects to keep costs down, build work ethic in your kids and allow them to earn some money to manage.


Set Real Goals

When you are just saving to save it can be hard to stay motivated. Choose a big personal goal or an experience for your family that you want to accomplish this year. Write it down, print out photos that represent it and hang a sign somewhere you will regularly see it. Have your kids do the same to help teach them needs vs wants, and making hard choices to reach a goal.


Let Money Motivate Your Kids

You may be a member of the parenting group that believe kids can’t be motivated to do anything because of money. The argument is only valid if you continue to subsidize them with money for other reasons and things. If the only way your child can earn money for a toy, video game, fast food, etc., is through earning it around your home, they will be motivated to do so. How motivated would you be to go to work if someone just gave you money for no reason? We’re trying to break the Circle of Dumbness, so stop giving money to your kids for nothing and teach them to earn it.


This Is A Test

Since no one is certain how our kids would do when faced with having to make financial decisions, test them. Give them $1000 in play money and a few days to decide what they are doing to do with it. Besides spending it, also provide the options of save, invest and donate to charity. See what your child does with the money and talk through the results. If your child spends all $1000, it’s time to have a talk and develop some money management habits.