Throughout Financial Literacy Month, the blog has given voice to consumers who have overcome financial challenges. Through their own words, these consumers have told you about what it was like to be in and repay unmanageable debt. They also shared inspiring words about the many ways their lives have changed as a result of their debt repayment efforts
On this last day of Financial Literacy Month 2010, Sharon Lechter discusses perceptions about money and the importance of spending habits among youth. Ms. Lechter is an author, educator, and international speaker. She also serves on the President’s Advisory Council on Financial Literacy.
Our nation is in the middle of one of the worst economic times in our history. As a result, Americans have had to take a close look at how they manage their money because so many families simply have less – whether that be because of a layoff, a home’s value declining or costs of college tuition skyrocketing. While there are many downfalls to our country’s current economy, it presents us with the opportunity to not only learn how to get our finances in order for a healthier future, but also to teach our children the necessary financial skills to fully prepare them for their adult lives.
Officially declared by the United States Senate in 2004, April is National Financial Literacy Month and promotes financial wellness while encouraging citizens to learn necessary skills on managing money and dealing with debt. As this month’s mission continues to gain exposure every year, more and more individuals are learning the principles of personal finance. The issue of financial literacy has become the central mission of my organization, Pay Your Family First, as this problem is plaguing our nation, especially among teenagers.
Financial literacy has largely been neglected in our public school system. While many eighteen-year-olds may be graduating from high school well versed in math, science, history, literature and other subjects, most of them don’t know the basics about managing money or the first thing about using a credit card.
The statistics about teens’ perceptions of money are startling to say the least and tend to be worsening during this financial downturn. The average teen thinks he/she will earn a salary of $145,000 out of school and just 26 percent of teens understand credit card fees. On top of this perception distortion, our nation’s current economy is having a negative effect on young adults, most notably students in college. According to a recent study by Arizona Pathways to Life Success in University Students, high school and college students are resorting to risky financial behavior. Students reported credit card debt up 60 percent and education loan debt up more than 85 percent compared to spring 2008. Data also points to students reporting decreased levels of feelings of financial wellbeing compared to 2008. This balanced with a teen unemployment rate of 25% just highlights the need for financial education.
To reverse some of these statistics that we’re seeing among young adults, it’s important to teach money skills at an early age so our children are prepared to deal with their first job, open their first bank account and charge their first purchase to a credit card. I recommend starting the conversation about money when children are as young as 5 years old. This ensures that they will grow up to understand where money comes from, how bills are paid and other skills that will set them up for financial success. Here are some suggestions for parents to start the discussion:
- Do You Know What Your Parents Do To Make Money? Explain what it is you do everyday that makes money and pays the bills. Encourage them to think of their own ways to make money while you are at it.
- What’s The Difference Between A “Want” And A “Need”? To your children anything they want enough instantly becomes a need. Ask them if they really need those new shoes, or do they just want them? It will be a great start to begin distinctions that might help them save money in the future and a great refresher for you too!
- How Can You Celebrate Without Money? Listen to your kid’s ideas and try to put it into practice it in the near future. Don’t just consider their ideas, actually do them. They might suggest fun and free activities all by themselves in the future.
- What Are Some of the Things You Could Do to Help Reduce the Monthly Bills at Your House? The important thing is to listen to what they might do and suggest some ideas of your own, explain that everything has a cost. Cutting down on the water bill by taking quicker showers or cutting back costs on gas for the car by consolidating trips, are great examples.
- What Could You Do To Help Someone Else Besides Give Them Money? Charity is the foundation of teaching kids about money and shows them that even their time has a value equivalent to money. See what ideas they have and get an idea of their interests and start encouraging them give back.
Sharon Lechter is the best-selling co-author of “Three Feet From Gold” and “Rich Dad Poor Dad.” She is also the Founder and CEO of Pay Your Family First and creator of the new ThriveTime for Teens money and life reality board game. Sharon is a CPA and member of the President’s Advisory Council on Financial Literacy under President Obama and the American Institute of CPAs Financial Literacy Commission. For more information on Sharon and Pay Your Family First, visit www.payyourfamilyfirst.com.