You teach them the value of hard work and the importance of telling the truth, how to be a loyal friend and a good citizen. But you might be overlooking one of the most important lessons you can teach your children to help ensure they do well in life – financial literacy.
Several studies seem to indicate that many kids just aren’t getting the message about smart use of money and credit. A 2009 study by Sallie Mae found that the average credit card debt for college seniors is $4,100, and that 84 percent of all college kids have at least one credit card. Other studies have found credit card use on the rise among high school students as well.
The Great Recession taught many adult Americans how little they really knew about financial literacy. Over the past few years, educating children and teens about smart spending, saving and borrowing habits has gained national prominence among educators, legislators, financial experts and parents.
Even such financial luminaries as Warren Buffet are getting involved. Buffet has lent his name and expertise to the Secret Millionaires Club initiative, a website and series of webisodes that strive to teach children financial literacy and entrepreneurship.
“It’s never too early to teach kids about properly managing their money,” says Ken Chaplin, senior vice president at CreditReport.com, which is sponsoring the Secret Millionaire’s Club. “We teach our kids to know the anatomy of a frog; however, we don’t necessarily educate them on the ways to manage a checkbook. The Secret Millionaires Club ‘Learn and Earn’ promotion will help to provide financial information in a fun and engaging way that can benefit kids well into adulthood.”
Teaching kids about money and responsibility is an interactive, team effort, experts agree. Tactics that parents may find useful include:
* Giving children a weekly allowance and helping them establish goals for their money, including saving some, investing a portion, donating some and spending a few dollars as well. This approach gives kids firsthand experience with how money will work for them when they’re adults.
* Teaching them to be little bargain hunters. Parents should shop with children and help them understand how to stretch their dollars by looking for sales, comparison shopping, and avoiding impulse or advertising-driven buying decisions.
* Instill in children the value of saving. Teach them early to put a little away from all money they receive. Open a bank account with them and give them incentive to save by pledging a matching contribution for every dollar they save. And lead by example. When extra money comes into your hands – from a work bonus or gift – take your child with you to the bank to deposit the money into your savings account.
Fostering entrepreneurship is another important element of teaching children about financial literacy. The Learn and Earn contest gives kids a chance to put into practice the financial principles they learn through the Secret Millionaire’s Club. Open to children ages 7 to 16 competing on their own or in teams of up to four people, the contest runs through Jan. 20, 2012, and encourages kids to create their own imaginary companies. Entries must include a complete description of the business, product and/or service and the structure of the company. Entries can be submitted online or via mail. One grand prize winner will receive $5,000 (per person for a team). To learn more, please visit www.smckids.com/learnandearn.