Parents are responsible for their children and are there to prevent them from making bad decisions such as starting a smoking habit or doing drugs but apart from these, parents are also given the often challenging task of ensuring a good financial future for their children and let them develop financial literacy. In a 2013 report by the Fiscal Times, 60% of all 50 states ranked low in teaching financial literacy to high school students – an alarming development that can make any parent worry about their children’s future. Financial education is needed at an early age. According to a Washington Post article written by Reba Dominski, the President of the U.S. Bank Foundation, parents need to teach financial literacy to their children as early as possible so that they are equipped with the tools and knowledge that they will be needing when they become adults.
Lead by Example
Whether it’s about ensuring that they know what credit reports are or teaching them how to save, good financial education can help develop a child’s financial savvy. While discussing the subjects of credit repair, debt, and interest rates may seem far too advanced for younger children, these financial concepts can (and should) still be taught in a simplified manner. According to Debt.org, children acquire their parents’ financial habits which means that setting a good example is something that parents should abide by. This can be done by letting them see how you budget for the groceries or bringing them to the bank to make a deposit. Their curiosity will bring about a series of questions as to what you are doing. This can then open the dialogue about money. Parents can be proactive too by explaining what they are doing and why they are doing it. For example, when going to the bank, parents can tell their children that they need to make a deposit to save for the future.
What the Experts Say
A CNBC report notes that young people who did not get any type of financial education are “more likely to have low credit scores and other financial problems.” Since only 17 states in the US teach personal finance classes to high school students, parents need to be more proactive when it comes to providing their children with a good foundation regarding money management. Adrienne Penta from Brown Brothers Harriman, a financial services firm, agrees and adds that while parents feel unqualified to impart lessons about money, good financial decisions start by teaching the basics. This includes teaching them about needs versus wants. Finance professor at Bryant University Peter Nigro says that parents should make children “aware of trade-offs as soon as possible.” One way to do this is to show them they every purchase has a cost and this can be done while grocery shopping. Raising financially savvy children can be daunting but applying the basics will go a long way. It will teach your children that money is an important resource and that it needs to be earned, budgeted, and saved.