April is a busy month honoring as it does everything from the Holocaust and the Armenian Genocide to autism, poetry, trees, and the earth, too. It is actually also a month devoted to financial literacy-an absolute must given the ongoing state of the American economy and the impact it's having on all of our lives.
Unfortunately, the federal government is the last place to look for an example of responsible money management. A quick perusal of Obama's new "budget" plan tells it all, calling as it does for a deficit reduction of more than $4 trillion over the next ten years-but new spending in fiscal 2014 of $3.8 trillion.
Couple that with the fact that, as of 12:28 p.m. on Saturday, April 13, the national debt stood at $16,814,506,044,148. Breathtaking, no? Just two days later on the 15th-tax day, no less--that figure had jumped to $16,821,032,503,046, and the numbers keep spinning onward.
Unfortunately, many of us, like the federal government, are swimming in debt. Indeed, the average U.S. household holds about $15,204 on their credit cards alone. Then add to that our average $148,818 in mortgage debt, and you end up with a whopping total of $848 billion owed on credit cards and $7.93 trillion on mortgages! Then too, 25% of us have no savings whatsoever, and just 11% of us with a 401(k) are putting enough money aside for retirement.
So much for role modeling... No wonder, then, that young people owe countless sums, too. Student loans alone have them in their grip with numbers that speak for themselves:
- Average student loan debt: $33,005
- Total student loan debt: $1,007.6 billion
Then add in what they also owe on their credit cards, cars, and mortgages, and it turns out that 20-somethings hold an average $45,000 in debt.
Some say part of the problem is that only 13 states require high schoolers to take a course in finance, despite evidence that those who do are likelier to pay their credit card bills on time and save, too. Moreover, while 45 states have adopted them, the Common Core State Standards do not address personal finance or economics whatsoever, instead focusing only on English and math.
As journalist and author Dan Kadlec explains, "Personal finance is 'reality' in the post-financial crisis world and should be regarded as the Fourth R. This is an emerging core subject area in schools throughout the world." For that reason, GW economics professor Annamaria Lusardi says, "We don't ask parents to teach math and physics and history. Why would we ask them to teach financial literacy?'
True enough; schools certainly have a responsibility to prepare their students for the real world of money management, but, at the same time, we parents do our children a huge disservice by keeping financial matters off the table, so to speak. Indeed, an ING survey reports that one-third of us are actually more prepared to talk to our kids about drugs, alcohol, sex, and, dating than we are money. The result: 87% of teens admitted that they know little about personal finance.
Additionally, a T. Rowe Price survey found that among parents:
- 77% said they don't always tell their children the truth about money matters;
- 50% admitted to regularly setting aside money to save or invest;
- 43% set savings goals;
- 32% avoid talking about their family's current financial situation with their kids.
Advises personal finance expert Howard Dvorkin, "Financial education must start from an early age. In the same way children learn about writing and reading, they should learn to manage money. It doesn't mean that at the age of 8, children should know how credit cards work, but they should be able to administer their allowance, and later on learn basic finances to avoid falling into debt once they obtain their first credit card."
In other words, we've got to do a better job and the younger the better. As author David Bach has suggested, the time is right when you hold up both a $1 bill and a $100 bill and your child knows which one to take. Start with an allowance and teaching your child to divvy up his "earnings" between spending, saving, and charitable giving. Add chores, too, to better prepare your child for real world work.
A recent online research study found that only 51% of parents give their kids an allowance, and 21% of them said they do so in recognition for chores. Meanwhile, just 47% use allowance as a way to teach about how to handle money irrespective of chores.
Another good idea is to gift with cash. It might not be as exciting as the latest Lego set or scooter, but doing so paves the way for youngsters to save for a dream list item and leave the rest untouched and accruing interest in the bank. Yes, you should also consider opening a bank account for your child, and Pennsylvania's Univest has just what you need. It's called the Eaglet Saving Account, and to get things started, the bank will deposit $10 in the account for you. Plus, no minimum balance is required nor is there a monthly fee.
Meanwhile, the Internet is a goldmine of financial resources for families. One of the most notable is DoughMain which offers "a set of integrated online applications, including a family calendar, chore tracker, and an allowance and rewards tool." It also offers three gaming websites, featuring "teacher-developed content including specially selected concepts in financial literacy for kids." And all that is just for starters.
Another site worth a look is tykoon.com, which calls itself "the premier financial tool for kids and their parents, empowering kids to develop stronger financial values with real money and real-life experiences-all under the safe and watchful of eyes of their parents." It simply doesn't get any better than that-plus it's also available as an app.
Also lending support is the FamilyMint™ Money Management Certification Program, "a complete step-by-step program for learning money management." As the site says, "Teach your kids to be good stewards of their money with this award-winning program. Only a few minutes a week results in lessons that will last a lifetime." Offering workbook and online versions, the program will help form and reinforce such essentials as:
- Tracking money
- Setting goals
- Delaying gratification
- Writing checks and deposit slips
- Understanding interest
The bottom line: In the face of our deficit-bound federal government, stumbling economy, and all-around out-of-control debt, making money management a family priority is an absolute must. Ditto when it comes to saving for rainy days and retirement, too. In other words, teach your children well, and serve as an example of wise financial decision-making. Be sure, as well, to convey the difference between wanting something and actually needing it-and then behaving accordingly. No regrets.