63% of Americans are financially illiterate meaning they lack the basic skills to reconcile their bank accounts, pay their bills on time, pay off debt and plan for the future.
Typically, our children’s first introduction to money comes in the form of putting change in their very own piggy bank. We encourage them to save their pennies and try to instill the values of saving and delayed gratification. But where does their financial knowledge go from there? How are we preparing our children to develop good money habits and make confident decisions when it moves beyond cash, to credit, loans, retirement and more?
According to research data by the Financial Industry Regulatory Authority, 63% of Americans are financially illiterate meaning they lack the basic skills to reconcile their bank accounts, pay their bills on time, pay off debt and plan for the future. That’s a major problem that we can all play a part in fixing.
First, we must educate ourselves in order to pass good habits on to our children. If you don’t feel confident in your financial decisions or ability to manage your money successfully, reach out for help. Credit unions and other nonprofit organizations often offer free financial counseling services to help people improve their credit, create a budget to follow and get advice on how to reach their goals. Also, talk to friends and family about your wins and struggles (you don’t have to share amounts to do this). The more we can talk about our finances and share tips/advice with one another, the faster we can spread financial knowledge in our communities. If you’d rather broaden your knowledge on your own, there are plenty of internet resources to help. Just make sure you’re using a reputable source.
Second, it’s time to educate our children. People form many of their financial habits by just seven years old, a 2013 University of Cambridge study discovered. So, it’s vital to start modeling good financial behaviors and teaching children about the value of money at a very early age. That piggy bank is a great start, but take it one step further. Explain why you’re purchasing one item vs. another at the store to save money, give them a budget when buying gifts for friends and family, help them save for a big purchase, or teach them generosity by splitting their allowance between save, spend, and give jars. Then, once they’ve got the basic concepts, let them apply those skills through board games like Monopoly or Life, or by starting their own entrepreneurial enterprises like a lemonade stand or selling popsicles at your next garage sale.
It doesn’t have to be a big project or a sit down lesson. By involving our children in appropriate decisions and empowering them to learn, they’ll absorb the knowledge and be able to build upon it going forward. Together, we can help lower that financial illiteracy number, raise money confident children and improve our communities for the better.