As a parent, you take your role as your children’s first educator seriously. You’ve taught them to brush their teeth, do their homework and go to bed on time—albeit with varying degrees of success on any given day. But what have you taught them about money?
You might think that preteens and adolescents are too young to learn about dollars and cents, that there is plenty of time for them to become acquainted with fiscal responsibility. But the following statistics on the Washington State Department of Financial Institutions website might change your mind:
- People in the 18 to 24 age bracket spend nearly 30% of their monthly income just on debt repayment. (10% of net income is a recommended amount for debt obligation).
- American children, teens and young adults (ages 8-21) earned about $211 billion in 2003 and spent at a rate of approximately $172 billion per year.
- The average 21-year-old in the U.S. will spend more than $2.2 million in his or her lifetime.
They get it, they spend it—and in far too many cases, the amount they spend exceed the amount they have. According to 2005 figures from Jump$tart Coalition, 45% of college students are in credit card debt, with the average being more than $3,000. The Richmond Credit Abuse Resistant Education (CARE) Program noted that the number of 18- to 24-year-olds declaring bankruptcy increased 96% in 10 years.
Where can this future debt-ridden generation learn better money management and financial planning habits? Possibly in school, although while 38 states have personal finance standards or guidelines, only seven require students to take a personal finance course to graduate, according to information from the National Council on Economic Education.
The money ball is back in the parent’s court, but help is available from your insurance advisor, financial planner and organizations such as LIFE. Here are some suggestions to start the money conversation with your children.
Share your sessions. Make them part of your planning session with your insurance professional or financial advisor. A discussion about the various types of insurance and the role they play is critical, especially since statistics have shown that while 70% of adult Americans say they personally need more life insurance, only 36% own a policy they purchased on their own, according to the LIMRA and LIFE Insurance Barometer Study 2011, and LIMRA’s Person-Level Trends in U.S. Life Insurance Ownership study 2011.
Make it a game. LIFE’s Next Generation Financial Literacy Program (with materials available as a DVD and online), were originally intended as tool for educators to use within the classroom to cover the basics of risk management and financial planning, as well as life, health and disability insurance. But parents and children can learn quite a lot from NextGen3, by taking the quiz, playing the interactive Risk game or getting a history lesson on the concept of “risk pooling.”
Teach by example. To really have an impact, you need to “walk the talk.” Engage your children in budget planning and investing discussions, or have them participate in researching the best options for saving money for a family vacation or college funds. When they see the long-term ramifications of every choice, they will be better able to make wise decisions when they are in charge of the piggybank.
It’s never too early to educate your children about the realities of life. And like most parenting experiences, you may end up learning more than a little yourself!