We always wondered why one of our classmates in grade school wasn’t buying comic books, soft drinks and candy bars like the rest of us.
We thought maybe he didn’t like to read, had a health condition we weren’t aware of, or didn’t have money (which at that time, was less than a dollar for several of each of those items mentioned above).
But the truth was that his parents taught him about making the best use of his finances. He was banking on the future. And let me tell you, he’s successful today because of that lesson.
That time of my life came to mind last week when the following news release came to me in an email. It has some very valuable information in it, so I encourage you to read it carefully, think about it, and see how you can use the suggestions for your children.
The release noted that having “the talk” with your child is more important than ever. “Teaching financial responsibility is the new ‘birds and bees,’” it said.
“There are certain life lessons that every child eventually learns with or without the guidance of their parents, but financial literacy is one talk that parents shouldn’t avoid or delay. Many of today’s youth aren’t equipped to deal with the complexities of life, including money management. For parents, having ‘the talk’ about financial responsibility with their child is a critical step in preparing kids and teens for their future.”
The release noted that studies show parents play an important role in teaching children how to handle money responsibly. In fact, a 2011 survey of high school seniors found that 87 percent said their parents were their primary resource for information about money management and personal finance issues. Interestingly, however, only 22 percent said they talked to their parents about money management frequently.
“Much like the birds and bees talk, children desperately need guidance from their parents in order to learn appropriate money management skills,” said Becky Franklin, EVP/sales manager at Arvest Bank in Oklahoma City. “Arming our kids with this type of information now will guide them well into adulthood, so start these conversations early.”
When is the best time for these youngsters to learn about money management? A Junior Achievement/Allstate Foundation survey found that 81 percent of teens say kindergarten through 12th grade, Franklin’s release said.
That same survey, she said, found that nearly 50 percent of the teens didn’t really know how to use a credit card effectively. But get this. Twenty-four percent still think they should get their first credit card when they are high school age or younger.
“This illustrates the disconnect between their desire for more education and the amount of actual financial knowledge of many teens,” Franklin’s release said.
She said a basic financial responsibility discussion should consist of these areas of focus for parents to frame their conversations:
· You need money to buy things. It seems simple, but reinforce that it is important to earn income and live within those means. This may include waiting to buy until the money is available and often involves making difficult choices about how to spend money.
· Savings is important and takes practice. The sooner they start saving, the greater progress they’ll make towards building good habits. Encourage that they put money into savings frequently and help them with setting realistic savings goals.
· Credit should only be used when necessary. Ensure they know a credit card is like a loan, interest will cost them more in the long run, and they should only use credit cards when necessary. Discuss wants versus needs in using credit for purchases.
· Protect your financial identity. It can be costly and dangerous to divulge personal and financial information online, in-person and over the phone. Providing this information too easily can expose them to identity theft and financial loss, so it should be done with care.
· Life is expensive. For older teens, make sure they know how necessities like taxes, insurance, utilities and interest on credit cards and loans are unavoidable costs they should be prepared for. These are often overlooked and less obvious than just the rent, food or car payment.
“Helping your teen gain actual experience in money management while still living in the home can be very valuable,” Franklin said. “Many banks have savings, credit and prepaid card products available specifically designed for parents and teens to use together to start building lifelong money management skills.”
She said that in order to teach children the appropriate financial lessons at the correct age, Arvest recommends that parents and educators start by using the following resources to get more information to prepare for “the talk” with your child:
1. arvestmoneyskills.com — The site contains financial education tips and lesson plans for Pre-K through college and for those with special needs.
2. whatsmyscore.org — This financial management website is geared toward teens and young adults and provides relevant information on transitioning from high school to college, including how to rent an apartment and how to buy a car.
3. mymoney.gov — A guide for any life-changing circumstance, this site provides financial information based on where you are in life – from the birth of a child to retirement. You’ll also find a list of resources and useful tools.
Bank on it. And to learn more about personal finances, check out the resources in KNOWIT.NEWSOK.COM/MONEY-OKLAHOMA