“What Does It Mean to Be Financially Capable?” asks a Huffington Post blog.
Financial understanding and capability is not acquired only in a classroom, but rather it is grown over time.
According to the article, “Research shows that the precursors for financial well-being in adulthood—such as good decision-making skills and attitudes about finances—are built during childhood and youth. That means we need to start early.”
Making good financial decisions will depend upon “a willingness to talk about money,” and “we need to commit ourselves to a more open and honest discussion about how we should spend, save, and invest our money.”
Schools, financial institutions, families, workplaces and communities can all contribute to positive financial outcomes with good communication as a foundation for financial literacy.
This week, learn how to have money conversations with youth. What our children learn today will help them have secure financial tomorrows.
‘Teaching kids about money is never just about money.’ –Dave Ramsey, author
Recent research findings disagree on the frequency and success of today’s money talks between parents and kids.
According to educational technology company Everfi, a “New Survey Finds That More Parents Are Talking To Their Kids About Money, But Lack Knowledge On Important Topics.”
Nine of 10 parents say they have money discussions with their kids. This represents an 18% increase of such conversations over 2003.
However, only 43% of parents think they are well-prepared to have money talks. Parents are more inclined to talk about issues influencing financial attitudes like making decisions on affordability, how to make price comparisons, and smart shopping habits.
“They are less likely to cover more challenging topics that prepared young people to interact with the financial system including credit scores and reports, establishing an emergency fund, and investing and growing wealth.”
Families rely on others to help, although 86% say they will be the primary source of information for kids to learn about money. Forty-two percent think school will be helpful, and 34% think kids will learn via a job.
Teens agree that parents are the source for information; 79% indicate their parents have had financial discussions with them. Only 55% of teens discuss financial choices they make with their parents.
Everfi says the private sector has opportunity to help fill a learning gap.
Meanwhile, a T. Rowe Price survey says 44% of parents will use every available opportunity to discuss money issues. Further, 71% of parents hesitate to discuss family finances with children.
Parents are more inclined to talk with sons about money than daughters. One top reason: A belief that boys need more assistance.
Survey results show that parents who are willing to have money talks weekly “are nearly twice as likely to have kids who say they are smart about money (68% vs 36%).”
Reasons money chats don’t occur:
Because many parents are uncomfortable discussing finances, it is important that schools become involved.
“How to Increase Financial Literacy? Start Young, Train Teachers,” says ThinkAdvisor.
“Financial literacy… has a critical impact on students’ ability to make smart choices about which institute of higher education to attend, what to study, how to pay for college, and how to manage student loan debt after graduation,” according to the article, quoting a Department of Education blog post.
Only 21% of teachers say their schools offer financial education. Under one-third of teachers are “completely comfortable” teaching this subject; only 12% include financial education topics in learning.
‘If you want to recapture your youth, just cut off his allowance.’ –Al Bernstein, writer
Research findings reveal many ways to teach kids about money.
See “Toddlers To Teens: How To Kick-Start Your Child’s Saving,” at the Consumer Financial Protection Bureau for a few guidelines by age group.
Those in early childhood will benefit from learning about patience. “Learning to wait is essential to good savings habits,” the article notes.
In middle childhood, kids observe their surroundings and know what they would like to acquire. It is important to encourage them to save, and parents might offer support by matching a portion of funds kids set aside.
By the time kids are teens and young adults, parents can assist by helping them to set financial goals and track savings.
“Help them get in the habit of gathering and comparing facts before making a decision,” says the article.
Kiplinger suggests parents can become involved in teaching money skills to kids by opening savings accounts, creating a savings plan, and teaching them about investments.
Charitable giving, too, is an important financial lesson parents can impart.
“Helping kids to understand the value of money and to develop good habits early can be very beneficial to their financial future,” the article notes.
U.S. News & World Report weighs in with “6 ways to Teach Your Kids About Money.”
Allowances can be good learning tools for kids. There are various ways to choose the amount, according to WebMD. Parents might use a formula based on the child’s age, determine an allowance by budget, kids might negotiate allowances, or an allowance may be offered for completing chores.
It is important parents maintain consistency by paying allowances on the same day each week.
‘The art is not in making money, but in keeping it.’ --Proverb
Finally, plenty of evidence exists to indicate financial literacy is important, and that adults may struggle from lack of awareness.
CNBC says almost 80% of millennials fail to invest in the stock market; 34% don’t know how, and three of four women say investing is confusing compared to 60% of men who say so.
Also, a recent Washington Post article indicates “many millennials don’t even know the basics of how credit cards work,” to include lack of knowledge of spending limits, interest rates, and not having understanding about how missed payments impact credit score.
Parents are important in teaching financial lessons, but it seems clear that other entities can offer assistance in the imparting of this wisdom.
Encourage and participate in money talks with today’s youth. Their secure future—and yours—depends upon it.