Financial literacy is a major issue confronting the world that has serious short and long term consequences. It’s really no fault of anyone individually, especially the average American. There is simply no collective body that provides educational information about finances starting from a young age. Because of this, the financial knowledge acquired by the average person is from word of mouth or their own personal experiences.
So how bad is financial illiteracy today? Only 5% of adults say they were taught about finances by a teacher. Furthermore, 40% of Americans would give themselves a letter grade of C, D, or F when it comes to their grasp of personal financial topics such as debt, budgeting, or saving. When it comes to more complex financial topics such as retirement planning or estate planning this figure is astoundingly lower. A full 85% of American parents now believe that financial education courses should be a requirement in high school. While we may be a long way from seeing approved financial education classes in public schools, the good news is that there seems to be the desire to increase financial literacy in America.
One thing that can be done to improve the financial literacy of future generations is to openly talk to your children about money. Money can be frightening or even mysterious to many, even well into adulthood. Planting the seed by starting at a young age and emphasizing money’s importance in our daily lives will make it easier for children to confront issues about money down the road. You can start by sharing little things you wish you had done differently over time. Maybe you wish you had started contributing to your retirement plan at an earlier age or didn’t pay down debts fast enough. By communicating your own shortfalls, it makes it less likely that your children will make the same mistakes themselves. If the lines of communication are open at an early age, then years down the road when estate planning and intergenerational asset transfer comes into play, your children will have a greater understanding of the situation and how to appropriately manage any sum of money.
It can also alleviate the emotional toll of money issues. Most people have experienced money worries at one time or another. According to Duke University’s Personal Assistance Service, 80% of Americans experience genuine stress related to money. They go on to state that half of Americans worry about their ability to provide for their family on a day to day basis. While money is always an uncertain and fluid factor in our lives, how we deal with those stresses may in fact be strengthened through early experiences and developing good habits about money early on. This all goes into boosting personal financial literacy which your children can use as an asset in future years.
Talking to children about money and finances can bring the importance of money and planning into a new context. Making the effort to search out information and educate your own children has the potential to improve your own personal financial awareness. You might stumble across a helpful topic,
or revisit something that triggers a change in how you handle your day to day finances. There are a number of online sources for greater financial educations for both children and adults. Some of these include the CFP Board, which recently launched a public awareness campaign. The Ad Council and the American Institute of Certified Public Accountants has launched the Feed the Pig campaign. Also, the National Council on Economic Education has helped launch www.themint.org to acquaint young adults with vital financial principles. The resources are out there to help improve financial literacy. Taking the steps to educate yourself and your children can go a long way to reducing stress through better decision making.
View Published Article on HVNN.com