As adults, some of us are very good at budgeting and others struggle. Some have their financial goals all figured out and others earn money and spend it without a plan. We can only speculate as to why people are different in their financial habits. What were they taught by their parents? Did they learn to budget early by example? Or maybe the example they had was living with low income with uncertainty. Whatever our own habits may be, it is important for us to educate our youth about budgeting and setting financial goals. In return, we will have better habits as well. Read more to find out how we can help future generations be financially responsible.
Financial Literacy in Schools
An article from Forbes.com tells us that only 17 states require high school students to take a class in personal finance. (Frazier, 2019) Mathematics, English and History are mandatory for graduation in most states. A student is required to know how to find the magnitude of a three-dimensional vector, but is not required to know what a credit score is or what the options are for saving.
One way that we can help students get financial education through their school is to research what classes are offered. Here is a list of helpful courses and topics that could be covered:
- Basics of Banking
- The difference between a bank and a credit union, checking and savings accounts, interest, line of credit and credit cards.
- Earning a Wage and Income Tax
- W4 forms and how to fill them out, tax deductions, benefit plans, 401K, insurance and direct deposit.
- Consumer Skills
- Researching purchases, making a spending plan or budget, supply and demand, value vs. quality.
- Building Credit
- Credit bureaus, good debt and bad debt, credit score in relation to loans, co-signers, loan to value.
- Financial Goals
- Budgeting, planning for college, contingency plan, career choice, retirement plan, saving for cars or vacations.
Ascent Credit Union offers more education on our Learning Hub
Parental or Guardian Responsibilities
As a parent or guardian, it is our responsibility to help children learn financial responsibility. Children are never too young to learn the value of money and saving. We have put together a list of things you can do for different developmental stages.
- Create a system for earning and saving. Children at this age are visual learners. Using jars, piggy banks or boxes are a great age-appropriate system. Label one box Spend, one Save and one Charity. Help them learn which amounts should be appropriate for each jar.
- Use the grocery store as an opportunity to teach them that they don’t always get things right away. They don’t have to get something every time you go to the store. When you are at the store, if there is something they want really badly, take a picture of it. You can print off the picture and put it on the “save” jar. Then they will have a reminder of why they are saving money.
- Give them age-appropriate opportunities to earn money. Here are some ideas:
- Put plate away after dinner
- Put dirty clothes in hamper
- Play with a younger sibling or pet
- Put toys away
- Open a savings account with them. Teach them about how financial institutions protect our money.
- Involve them in the grocery shopping. Talk with them as you select items and why. Ask them to purchase something for a specific amount of money.
- Teach them about goals for saving.
- Continue to provide ways for them to earn money.
- Start introducing them to consumer tools such as using coupons, researching products before you buy them, and using store brands instead of the more expensive brand.
These are the ages that kids start to hang out with friends more. They are beginning to be more independent. This is also when gifts get more expensive.
- Teach kids about an entertainment budget. They might start walking home from school and stopping by the store for a snack. Or they could start going to movies with friends. Help them identify how much they have to spend, then help them with the cost of activities to set up a budget. If you are saving for a big purchase, you will be more likely to forego the snack purchase.
- Show them how interest works. If they already have a savings account, you can show them how the interest is calculated. The more you save the more you get.
- Saving for a car! Driving is one of the biggest thoughts on these kids’ minds. Show them all the expenses that come with a car. Teach them about insurance and maintenance. Be upfront with them about your plans of what they will drive. If you are like most parents, you will not buy your 16 year old a brand new Corvette. But you may purchase a modest, good quality car and encourage the teen to help pay for it. Or you can give all the responsibility to the child and have them earn money and buy their own car. Whichever decision you choose, there is always a lot to learn.
There are so many things that these teens need to know before being an “adult.” These years are key for teaching our children good financial habits. They will soon be out on their own and therefore need to know the tools to help them be financially responsible adults.
- Open a checking account with a debit card. Help them with a budget and moving money from savings to checking.
- They will already be thinking about college. Let them know there are lots of options for financial assistance. Getting a good high school education and making plans for college will set you up for more opportunities. Start a college savings. Talk to your financial institution about savings plans specifically for education.
- Start giving them more financial responsibilities. Most youth have cell phones. Have them pay for their service or that pricey smart phone.
- Auto insurance is a must. Teach them early about how a positive driving record can save money on insurance. Contact your insurance company and find out what benefits can be given for good grades.
- Let them pick a meal to prepare. Have them purchase the ingredients and find the value in picking one brand vs. another.
- Talk openly about your home utilities. Be proactive in turning off lights, saving water and maintaining temperature. Let them see the monthly bill and praise the household when money has been saved.
It is not hard to find ways to teach our children about being financially responsible, but it is so very important for the future of our society. In teaching our youth, we will also gain better habits with our own finances.