“Money does not grow on trees” and “We are not made of money.” Despite these warnings, in the eyes of a child, want usually wins out over need, especially when it comes to shopping for clothes and school supplies.
For concerned parents, back to school season is an excellent time to start teaching their children about financial basics such as budgeting, saving and using credit wisely. According to “Investor’s Business Daily,” more than one-third of children ages 12 to 17 still use a piggy bank as their primary way to save money, and more than half have received no financial education at all.
In addition, a survey commissioned by the GE Center for Financial Learning found that teens are developing some risky personal finance patterns that could come back to haunt them later in life.
Nearly 60 percent of teens pay off their own monthly credit card bill, however 40 percent of teens have their parents pay off their credit card bills for them. Up to 41 percent of teens report that they don’t have or don’t know if they have a savings account. And finally, according to a survey conducted in 2002 by the Jump Start Coalition for Personal Financial Literacy:
• Slightly more than a third (35.1 percent) of this year’s students knew that retirement income paid by a company is called a pension, down from 46 percent in 2000 and 63.5 percent in 1997. In addition, 33.3 percent thought such income was Social Security, up from 30.3 percent in 2000 and 29.2 percent in 1997.
• While almost 60 percent of the students knew that sales tax “makes things more expensive to buy,” nearly one quarter (21.2 percent) thought there was a national sales tax percentage of 5 1/2 percent. Nearly 17 percent thought the federal government would deduct it from paychecks and 3.7 percent thought the tax didn’t have to be paid in cases where income was very low.
In light of these findings, Ginita Wall, advisor to the GE Center for Financial Learning, has come up with some “lessons” for parents to start teaching their kids about money:
• Put savings first. Once your child has determined how much to save from each week’s allowance, make sure that he sets that money aside first and only spends what’s left. For children, as well as adults, saving what’s left over after the money has been spent doesn’t make sense, because money is seldom left over.
• Encourage your child to keep track of his or her spending. Offer a special incentive if the child can tell you next week at allowance time how last week’s allowance was spent.
• Open a checking account for your teen. By the time a child is 13, he or she should have a checking account and a savings account.
• Teach children how credit cards work. An appalling number of teenagers don’t understand that credit cards are a form of borrowing. If children know how the cards work before they get one, they may be able to handle the responsibility better than teens that get a card and know nothing about them.
It’s never too late to learn the important lessons around saving and spending money wisely — to learn more, visit the GE Center for Financial Learning at www.financiallearning.com.
– Courtesy of ARA Content
