October is National Financial Planning Month and the statistics paint a gloomy picture of American’s ability to successfully manage their financial futures.
- 77% of adults live in states that score a D or F grade in personal finance comprehension based on data from The Center for Financial Literacy at Champlain College.
- The Federal Reserve Bank of Boston published a study finding 65% of credit card users don’t pay off their bill every month.
- The number of states that require students to take a personal finance course in high school has remained stationary at 17 since 2014 according to the Council for Economic Education.
- A Harvard study found that teaching kids personal finance in school has no impact on their investing or savings decisions anyway. Most money lessons are learned at home.
Americans are caught in a trend of passing bad financial knowledge down generation to generation. What our parents taught us, verbally or by example, about spending, saving, credit and investing was probably wrong. Parents and kids alike can re-educate themselves and put an end to bad money habits by:
Look Differently at Chores & Allowance – While a majority of parents agree that kids should be doing chores and receiving an allowance, a portion feel money shouldn’t be the reason kids help around the house. It’s those parents who should look at chores and allowance differently. Think of it as a child’s first job and a first chance to teach them things they need to know (work ethic, direct deposit, budgeting, opening bank account, taxes, etc.) before they head off to get a real job someday.
Educational TV – There are thousands of books available on finance and managing money, but don’t waste your cash buying these for your kids. They would learn more from watching movies like “Moneyball” or “The Big Short”, or TV shows like “The Profit” and “Shark Tank”.
Check In at Check Out – When you’re ready to swipe your card at the store check out engage with your young kids and grab their attention by letting them help run the card through the machine. Explain that the card is a key that unlocks the money from your bank account and gives it to the store to pay for your items. This will get your kids thinking about how digital money works.
Schedule Computer Time – The next time you log in to pay your bills online, have your kids help too. Explain along the way what paying bills means for the household and what decisions need to be made to keep a balanced budget.
Have Kids Pay For Special Items – Parents should let kids spend their own money for items that may be considered extra, special or not on the necessity list. Kids can get a quick lesson on what items cost when it’s their money that is being spent.
Parental Stories – Every parent has some financial successes and failures that can provide critical examples for children. These kinds of lessons can be valuable as your child grows up and is faced with similar decisions.
Checking With Schools – Ask your children’s teachers what they financial education they are receiving. If they are young and just starting to count money, parents can support these efforts at home with simple conversations. For older kids, the financial conversations may need to be more in-depth. By checking with the school, parents will have a better idea what their kids know, or worse yet, not know.
