How to talk with your kids about money management
Less than half of the states in the U.S. teach financial literacy in grades K-12. In Wisconsin, only 44 percent of school districts require a course in financial literacy. Parents: it’s up to you to teach your kids how to manage money.
If these past few years have taught us anything, it is that we are not good at personal finance. Many families have experienced foreclosure and bankruptcy. Our kids have been watching and they are scared. They know that college is important to their future earning potential, but that it is expensive. A recent survey shows 67 percent of teens are afraid they won’t be able to afford higher education.
Sure we’ve made mistakes, but our kids can learn from them. Don’t be afraid to admit where you went wrong. Tell them you would like to learn better money management along with them. Make it a family project.
Learning to budget
If you don’t have a family budget, build one together and put your children on budgets too. Let them know how much they will receive from you on a monthly basis. If they want to purchase a big-ticket item, they will have to save up for it and perhaps, sacrifice other purchases. Or better yet, they will have to increase their income by getting a job.
Talk about saving for college. Have them research college costs and set goals. Decide how much you are able to contribute to their education and let them know your savings plan. In our family, we rewarded our daughters by matching their college savings on a two-to-one basis.
If they want to attend a college that is out of your price range, let them know there are alternatives such as attending a local technical or community college. Investigate all the options including transfer, financial aid and scholarships.
When I was in junior high school, my mother gave me a monthly clothing allowance. I had a checking account and had to keep track of my expenditures. If I wanted a new winter coat, I had to save up for it. Sometimes that meant I couldn’t buy the most expensive, stylish coat either. Now, you can give them prepaid debit cards instead of pulling out your credit card whenever they want to buy expensive athletic shoes or the latest cool jeans.
What is a credit card?
The next time you pull out your debit or credit card take a moment to explain to your child what credit is. You borrow money. You must pay it back and you must pay extra for the privilege. If you don’t pay it back on time, that privilege will cost more. The more you borrow, the more it will cost you. You can also show them your statements to help explain the process.
When the time comes for buying school supplies, collect all the advertising flyers and ask your child to find the best bargains. Show them how to compare prices. This is also a great summer math refresher. Take them to the grocery store and show them how to find the best bargains. Many stores provide cost per ounce or per unit. One package may show a lower price, but is it the same amount of product?
Find out what your school district is teaching students about personal financial literacy by asking your child’s teacher. Get a glimpse at the Wisconsin Department of Public Instruction website or use their materials as a resource. Your own financial institution may have resources to help you teach your child good money management.