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Financial Education for Everyone

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September 7, 2007

That anguished roar you hear is the sound of millions of students returning to school after summer break. As a parent, you might feel relief that teachers are taking over the reins, but hold on: School may be the best place for kids to learn the three R's, but you're probably still the best source for the fourth R – financial Responsibility.

Although a nationwide movement to institute financial literacy curricula in our schools is gaining momentum, currently the vast majority of schools either don't offer such courses or don't require them to graduate. Until that happens, it's up to parents to ensure their kids have the financial management skills they'll need to face the responsibilities of adulthood.

Charles Schwab's annual "Teens and Money" survey confirmed that most teens want more money coaching from their parents. It found:

  • 64 percent of teens would rather learn money management basics through experience than in the classroom.
  • However, only 30 percent believe their parents are concerned with ensuring they learn those basics.
  • Only 39 percent said their parents discuss money issues with them at least weekly.
  • Only 34 percent feel knowledgeable about balancing a checkbook, while 26 percent understand how credit card interest and fees work.

Visa Inc. recently conducted a survey that shows not much has changed over the years: Only 48 percent of its cardholders said they'd learned money management skills from their parents, while 41 percent said they learned it the hard way or were self-taught and only 9 percent in school.

Say you're 22, earn $30,000 a year and put aside 6 percent of pay ($150 a month) until age 65. At an 8 percent average annual rate of return, your $77,400 investment will grow to $619,000 by then. But if you don't begin saving until 32 and set aside the same monthly amount, you'll only accumulate $274,000 by 65 – a huge difference. By increasing the percentage of pay you save and factoring in annual raises, your savings will skyrocket even further.

Here are a few ways to give your children a leg up:

Set a good example. Kids see right through "Do as I say, not as I do." If you consistently spend more than you earn, don't set aside emergency savings and don't budget, that's the behavior they're learning from you.

If you need help creating a budget, check out Practical Money Skills for Life, a free personal financial management site sponsored by Visa Inc. (www.practicalmoneyskills.com/budgeting). And consider consulting a financial professional for your particular situation.

Set realistic expectations. According to the Schwab survey, teenagers expect to earn $145,500 a year, on average. If only. It's easy to see how unrealistic pay expectations might lead young adults to take on too much student–loan or credit–card debt in anticipation of being able to pay them off quickly.

When your kids start discussing career choices, help them research what various jobs pay, what educational requirements they'll need to meet and how much that education will cost. The Salary Wizard at www.salary.com contains pay data for a broad array of jobs by geographic location.

Share the bills. Have your kids help review monthly bills and balance the checkbook. They'll be shocked to learn how much money goes toward the mortgage, gas, utilities, food and clothing. Give them a voice in the family budget by looking for ways to save money in some areas (turn off the lights, fewer trips to the mall) to increase funding for others (better vacations, college savings).

Show how savings add up. Curb your kids' impulse spending and encourage saving by matching a portion of any money they save each month.

Take the mystery out of finances now so your kids will be able to fly the nest when the time comes – and, so you'll be able to afford to remodel the nest when they do.


This article is intended to provide general information and should not be considered health, legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.