21 Mar

Kids and Money – Part II

March 21, 2008

In my last entry, I spent time on a few savvy tricks that parents can use to educate their younger kids to be smarter about money. The idea is not so much to turn them into money-saving automatons, but to start a learning curve. This time we are going to move up the ladder to older kids (middle and high school age).

In a 2006, the JumpStart Coalition for Personal Financial Literacy surveyed 5,000 high school seniors; the survey tested their ability to manage financial resources such as credit cards, insurance, retirement funds, and savings accounts. The average score was 52.4% – not so great on any bell-curve. This as we’re ready to push our kids out the door to college and, according to Nellie Mae (the nation’s largest maker of student loans); the average undergrad has $2,200 in credit card debt.

There is no doubt we are in an “interesting” time with the sub-prime issue continuing to plague our economy. I just heard a statistic that in the U.S., we now have less than 50% equity in our homes for the first time since the 1940’s. It seems to me that we see the government trying to aggressively fix the consequences of the sub-prime problem, but maybe we should spend some time on the idea of prevention; to me the issue is what we can do to teach our young people about how to use money wisely and grow into adults that understand the principles of basic personal finance.

When I was in high school (I graduated in 1986 to put perspective on this), the only exposure I got to personal finance was picking and tracking some individual stocks in my Economics class – that was it. In my thought process, it is the responsibility of schools to prepare students for the real world. I am not proposing that we replace core academic classes – but imagine if students left high school with a strong grasp on: how to balance a checkbook, student loans, credit cards (and the debt issue associated with them), and taxes. You could take this concept past what you need to know in college and also give them an education on investing, good debt vs. bad debt, financing a car, insurance needs, how to get a mortgage, credit scores, tracking expenses, and how to set up a budget.

We know that as we send our kids off to college, they are bombarded with temptation which can lead to financial hardship that can chase them their entire life. I also know that there are middle schools and high schools that do embrace personal financial literacy. I just believe, as I look around at the economy, that we could do more on the front end to help prevent bad decisions and integrate this idea of financial literacy into our education system.

As a sidebar, there is an excellent website, www.moneyinstructor.com that hits this concept square on the head with a tutorial approach.

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