February 2007
Why Financial Literacy Counts
Earning money and knowing how to use it wisely area arguably two of the most important skills needed to survive on this planet. Yet, many of us have never been formally taught the principles and practices of finance.
No wonder that personal debt in America has reached record levels and that the number of young people filing bankruptcy is increasing. Nineteen percent of all personal bankruptcies are filed by college students.
The average student who graduates from high school lacks basic skills in the management of personal financial affairs. On a recent nationwide survey of high school seniors, 65% of the students failed the financial literacy test. Yet, one-third of the students surveyed use credit cards. Many young people fail in the management of their first consumer credit experience.
Studies show that if a child doesn't learn financial literacy at home, chances are he or she won't learn it all. That's why your role as a parent is key.
Tips on helping your child to become financially literate:
What Parents Can Do
If you are the parent of a high-schooler:
- Have a conversation with your teen about the real cost of life after high school. Share what you know about rent, mortgages, taxes, health insurance, car payments and saving for retirement.
- Explain the pitfalls of using credit cards. Do not let your young teenager have a credit card.
- Encourage your child to take an economics or financial literacy class in high school.
- Help your teen set short- and long-term financial goals, and work out a budget with them when they get that first part-time job. .
If you are the parent of a middle-schooler:
- Help your child open a savings account and encourage regular deposits.
- Explain the advantage of “interest earned” as opposed to “interest paid”.
- Talk with your child about managing a household. Demonstrate setting a budget, comparison shopping, paying bills.
If you are the parent of a grade-schooler:
- Give your child a piggy bank, or open a savings account for him or her. Explain the meaning of saving money.
- Set a basic allowance, then allow your child to “work” for extra money.
- Let your child make small choices about what to buy with his or her own money.
It is important for children to learn how to make smart decisions about money, beginning at an early age and continuing through their school years.
For more helpful information on financial literacy, visit:
www.financialeducation.citigroup.com,
www.fpanet.org, and
Jump$tart Coalition
FINANCIAL LITERACY: FACTS FOR PARENTS
DID YOU KNOW?
Financial literacy is a big problem nationally. Americans, as a whole, carry $800 billion in credit card debt. Their understanding of how to manage money is decreasing, not increasing. According to BusinessWeek.com, the amount that Americans owe on loans for houses, cars, credit cards, and other purchases add up to nearly 100% of their annual income after taxes, up from 75% in 1992.
Source: msnbc.msn.com; Business Week online 8/3/2002
Most teens handle money poorly. In a survey by Teenage Research Unlimited, teens said they spend 98% of their money instead of saving it. Teenagers in the United States spent $179 billion in 2006. Fifty-three percent of parents agree that their child thinks "money grows on trees."
Source: Teenage Research Unlimited 2006, networksfinancialinstitute.org
Most high school seniors are not financially literate. In a 2004 nationwide survey of 12th graders on the basics of personal finance, 65% of the students failed the survey. On average, students answered almost half of the questions incorrectly.
Source: JumpStart.org
One in five bankruptcies is filed by college students. 96% of college students use credit cards. Fifty percent of college students are in credit card debt. The number of young people (18-24) filing for bankruptcy had doubled in the last decade. College students account for 19% of all personal bankruptcies.
Source: BankruptcyReader.com
Parents are the biggest influence on students' attitudes toward money. According to the 2004 Jump$tart survey, nearly 60 percent of students said they learned most of their money management skills at home.
Source: JumpStart.org
Parents feel inadequate to help their child learn about money matters. Among parents with children 5 or older, only 26% feel well prepared to teach their kids about basic personal finances.
Source: networksfinancialinstitute.org
Excellent tips for parents & high school/college students