If we don’t teach a child to read, we don’t expect them to excel in a classroom or to not struggle in a world of written signs, instructions, and books. If we don’t teach a child about personal finances, we shouldn’t expect them to put aside 10 percent of their paycheck for an emergency, deny signing up for another credit card or reject another student loan and increase their hours at work — but we do. However, state by state and nationally we are starting to make changes so that students will learn throughout K-12 to understand and manage money.
In this tough economy, many of us have asked when the recession might end and what we can do, personally and as a nation, to get out of it. There are many theories, but one thing is for sure: we can’t go back so we have to look forward. This is a big reason why states have begun this emphasis on financial literacy and some states, like New Jersey, feature this as a required course for high school students. Some students have picked up poor financial habits from their parents or simply no financial habits, mixed ideas about needs and wants, little guidance on saving, investing, and credit card dos-and-don’ts, and lack perspective on how their spending today effects their feelings of success, happiness, and fulfillment in the future. In many urban areas, students suffer from lack of advice and modeling. In many affluent suburban areas, students might suffer from being over-indulged.
You can get yourself and your kids thinking about improving financial acumen by exploring these kinds of questions:
1. What’s the difference between needs and wants? A need is something you must have to survive. A want is something you would like to have. Needs are mostly confined by biological needs, like food, water, shelter, clothing, and a phone in some scenarios. Wants can be two categories: wants that would make a basic need easier OR something that would be nice to have but not directly correlated with a basic need.
2. Do you have a bank account?: Find a bank with a convenient location so you don’t make excuses about not having enough time to go there. Avoid opening a bank account online and always meet with a banker in person to discuss the rules and regulations of your bank account before signing over your money.
3. Do you have financial goals?: A long-term goal is something you want to achieve in the distant future, like going to college or buying a house. A short-term goal is something you hope to achieve in the near future, like buying a new pair of jeans or going on a roadtrip. Write down your goals. Then, break them into manageable pieces so you can gauge your progress and so you are more likely to finish them.
This summer, LifeBound will be releasing a financial literacy book for teens, Dollars and Sense: How to be Smart About Money. Teens will asses their relationship with money, learn how they can financially plan in high school, use critical thinking skills to make financial decisions and much more. Parents can work through this book with their children, helping to set both family and personal goals so that students can negotiate the economic downturns and upsides they are likely to experience in the course of their lives. The book is also designed to be used in high school classes or summer enrichment programs. We will also explore some of the greatest and most common pitfalls young people make. What is the greatest financial pitfall you experienced as a young adult?