Part I: An Introduction to Teaching Financial Independence

Monday, October 22, 2012 at 10:03pm by Site Administrator

 This is Part I of a larger educational resource, Money Management: A Guide to Teaching Finances to Children.

 

Introduction

 

Financial literacy, while it may be an area where parents fear to tread, is a crucial part of education. However, only four states require high school students take a financial management class. The responsibility for teaching young adults to live within their means, avoid debt and accumulate savings nearly always falls to parents. In a study conducted by the National Foundation for Credit Counseling in 2010, 41% of adult respondents claimed to have learned money management skills at home.

The good news is that kids in America today want to learn how to effectively manage their finances. While
nearly half of today’s students do not understand the rules of financial responsibility, 53% of high school seniors
polled in a Capitol One study reported that they would prefer to learn these skills, and the majority of them would rather learn them at home. Unfortunately, only 27% of these students reported that their parents share information about responsible money management. If you choose to answer this call for information, you can teach financial management concepts to children as young as preschoolers.

Toddlers can be taught to recognize currency and to save in a piggy bank. Elementary school students can be given an allowance and shown how to allocate money toward savings, charity and disposable income. High school students can learn to monitor expenditures and meet a budget via access to a checking account or debit card. Parental guidance like this enlightens children about the value of a dollar, and that awareness can lead to effective financial management as adults.

Advice about proper credit management is especially helpful when your children approach young adulthood. Debt is a common pitfall; educating children about the way the credit system functions and its potential negative consequences is critical for parents. Identity theft is also a bigger problem than it used to be; one study recently determined that one child in every classroom has had their identity stolen, and nearly 12% of children with "credit problems" were under age 12. Vigilance and instruction by parents can go far towards preventing this.

Continue to Part II: Government-Sponsored Savings Programs, or return to the Table of Contents.

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