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Children and adolescents are impressionable. We, as parents, don’t always do an adequate job of imparting practical lessons and wisdom. One area that we really need to be focused on is financial literacy.
The Absence of Financial Literacy Among American Youth
Just 16.4 percent of U.S. students are required to take a personal finance course in order to graduate high school? This means nearly 85 percent of students leave high school with a handful of math, science, English, and history credits, yet no practical knowledge on how to manage the money they’ll soon make in their careers – and it’s having a considerably negative impact on the financial future of today’s youth.
One of the biggest problems today’s high school graduates are facing is student loan debt. Students aren’t properly versed in how debt works, what the difference is between good debt and bad debt, and how repayment works. The result is many students borrow more money than they’ll ever be able to repay over their working lives. This causes them to play from behind and make poor financial decisions down the road.
Beyond student loans, many high school graduates and college students face a number of other issues that are a direct result of a lack of financial literacy.
“They will need to plan their spending, use credit and debit cards for the first time, even make monthly recurring payments like rent,” personal finance expert Robert Farrington writes. “Without an understanding of the concepts and tools to be successful, many students and graduates struggle.”
Most students and graduates lack the basic fundamentals of budgeting, debt, saving, and living on less than they make, but it isn’t always obvious until after they’ve moved away from home.
“These gaps only become apparent when the student or graduate runs into trouble,” Farrington explains. “Many times these gaps are masked by supplemented income or free rent, but once these crutches go away, the problems arise.”
Giving Your Children a Head Start
As a parent, you can give your kids a head start by making sure they possess basic financial literacy skills. You don’t have to be a financial advisor or stockbroker to do this. All it takes is smart, consistent actions that leave a positive impression on your children.
1. Lead by Example
Disagreement over finances is one of the top reasons for divorce in America. The convergence of money and marriage is a huge friction point in relationships and you need to set a strong example for your children by working together with your spouse. When children see that money is something that brings their parents together – rather than tears them apart – they’ll have a much healthier view of life.
2. Be Strategic With “Allowances”
You obviously have a right to make your own choice, but be wary of giving an allowance to your kids with no questions asked. An allowance makes children feel entitled. Instead, give them a weekly “commission” for completing chores and other responsibilities. This simple change in semantics makes a big difference.
Furthermore, provide some stipulations with the commission they receive. From a young age, set up three different mason jars with labels that read Save, Share, Spend. Have your children divide up each commission into these three categories and explain the importance of each.
3. Let Them Mess Up
Today’s youth grow up far too sheltered from the realities of the world around them. As painful as it can be to watch, let your child mess up from time to time. Let them blow their entire savings on a dumb toy they’ll grow tired of in a week and then miss out on a trip to the amusement park with friends. Let them skip chores and not earn any commission for a month. Believe it or not, they’ll eventually learn how to make smart choices.
4. Explain Challenging Concepts
Never assume that a financial concept is too challenging for your child to grasp. By demystifying tough subjects, you lay the foundation for better financial literacy in the years to come.
Go Against the Grain
Most parents don’t teach their kids financial literacy, and most school systems don’t either. But just because everyone else is doing one thing, doesn’t mean you can’t choose a different route. By going against the grain and giving your children the skills to properly manage, spend, and save their money, you can put them ahead of their peers and on the fast track to financial success.
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This content is sponsored by Larry Alton.
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Photo credit: Pixabay