Parents lack knowledge for teaching financial literacy to kids
Who else do kids have but their parents for getting a personal financial education? And what are they learning? A recent survey showed that most people learned their personal finance skills at home, from their parents. But the same survey showed that a great portion of those people gave themselves failing financial grades. Some people say that personal financial literacy needs to be taught in school. Others say that it’s not hard for parents to get up to speed on personal financial literacy so they can pass the knowledge along.
Parents in dire need of financial education
In its 2010 Financial Literacy Survey, the National Foundation for Credit Counseling asked people where they learned the most about personal finance. Most said they learned their personal finance skills from their parents at home. But when people were asked to grade themselves for financial literacy, nearly 25 percent gave themselves a C, D or F. The NFCC concluded that those in charge of the financial education at home are in dire need of financial education themselves.
Reading, writing and personal finance?
In this tough U.S. economy, many parents are drowning in debt, not planning for retirement or saving for college or able to purchase a house. NJ.com reports that these people may have been able to avoid these troubles if they took basic financial literacy courses in school. The NJ article said only 14 percent of teens nationwide take personal finance classes in school. NJ proposed that if the rate of teens taking personal finance classes in school nationwide had been higher in the past, perhaps the U.S. economy would be stronger today.
Kids set up for financial failure?
Last year, Wells Fargo conducted a survey and found out that only 5 percent of people ages 18-21 are confident they will achieve their financial goals. The survey discovered that only 41 percent know what a credit score is; only 28 percent understand annual percentage rates; only 41 percent understand the concept of the 401(K); and only 31 percent understand compound interest.
A financial tune-up for parents
It may be awhile before your school district decides to follow the lead of New Jersey, which is running a pilot project requiring financial literacy classes for high school students. But until then you can set a good example for the kids by getting your financial house in order with a mid-year financial tune-up. Boston.com offers five good places to start:
1. Budget and Spending — Take a look at your spending plan from the beginning of the year and compare your cash flow for the first six months. Did you allocate enough to cover expenses, or are you falling behind in certain areas? Start tracking every penny you spend, put a plan in place and stick to it.
2. Savings — Set aside cash for emergencies and short-term goals. Even a small amount can play an important role. The Consumer Federation of America found that with just $500 in the bank, you’ll sleep better and will be more likely to avoid high-cost borrowing and nasty fees for overdrafts.
3. Debt — Carrying high debt loads can have a big effect on your credit score, make monthly budgeting more difficult and leave you more vulnerable in emergencies. The first step toward solving these problems is to stop using plastic and chart a plan for paying off your cards.
4. Taxes —There’s a lot of uncertainty for people who try to plan for taxes this year, because Congress has not yet addressed a number of expired tax laws. But tax rates are expected to go up for all but the lowest income brackets in 2011,so be prepared.
5. Retirement — A retirement plan review starts with your 401(k), but it doesn’t end there. It includes Social Security and company pensions, as well. Figure out how much money you need to provide for yourself, and then to put a plan together.