Financial Literacy and Children

I recently received an email, suggesting I talk about teaching children financial literacy. That is something I view as very important, the younger they learn the better off they will be, when they grow up. However, it boils down to being the parents responsibility. If the parents doesn't teach them, their inaction will speak louder then anything the kids learn in school. Let's face it, kids learn by watching what their parents do. I am a great example of that. I knew from school and church the right way to handle money, but seeing my parents bad habits spoke louder then the head knowledge I was given.

Everyone knows that young people are pros at spending money; millions of dollars are spent annually on advertising aggressively directed towards them. They know how to use ATM machines to take money out. But, in these uncertain economic times, do they know how to save it? And do they know how to think long-term – beyond the weekend – about their finances? What about credit card debt? Or investing for the future?

The National Council on Economic Education (NCEE), a nationwide organization that serves to promote financial literacy with students and their teachers, has this to say on its website: “NCEE surveys show that nearly half of our young people don't understand how to save and invest for retirement, nor how to handle credit cards, don't know the difference between inflation and recession, nor how government spending affects them. If we fail to act now to improve economic literacy in this country, our children will be at risk for crippling personal debt, costly decisions at work and at home, and lack competitive skills in a fast-paced global economy.”

- Education.com

Even Robert Duvall, PhD, President and CEO of NCEE, agrees. In the above article he says, “We know that the skills of managing your money well, are not skills that you’re born with. It’s learned behavior.”

So what can parents do?

1. First and foremost, set a good example. Because kids, as I said above, watch everything their parents do. It doesn't matter what a parent tells their kids, it's what the kids see their parents doing.



2. Start saving – at any age. The earlier a person starts building their savings, the better off they will be financially in their future.



3. Budget sense. The article suggests including the kids in on the budget discussions with you and your spouse. This way the kids get a better understanding of their families financial situation and how to handle money properly.



4. Make it a long-term conversation.

   Financial matters can get complex pretty quickly. But kids who learn basic principles of earning money and saving it, of what things cost and how to budget for their expenses, will be in a much better position as young adults to understand the more complex issues of mortgages, credit cards and interest rates. Parents who introduce their kids to solid financial principles early on are providing an important part of their children’s preparation for the "real world."




5. Shop Together. This is the perfect time to talk finances. It allows the kids to see and understand the prices of things. Why does this item cost 50 cents more than the other one? What does that extra 50 cents buy you? Is it worth it?

April was Financial Youth Literacy Month, which means it's as good a time as any to start talking to kids about money. Lori Mackey, the "Money Mama" and author of "Money Mama & The Three Little Pigs," a read-aloud book that teaches the basics of sound money management, visited "Good Morning America" to explain how to teach kids about saving and spending.

In an article that ABC aired in 2007, Mackey discussed kids and money.

Mackey said it's never too early to start talking to kids about money.

"It's never too late, but if you can start early, you teach them to give, invest, spend and save wisely, they learn the habits of wealth," she said.

One of her first suggestions is to teach the kids the 10, 10, 10, 70 rule.

10% Charitable giving

10% savings

10% Invest

70% Spending

And their are money banks (aka piggy banks) that are designed to do this from various organizations. Off hand Crown Financial Ministries as such a bank that they sell. In addition, if memory serves me, Dave Ramsey does as well. Perhaps, one of his staff members (like Chris) that reads this blog can confirm this. I have also seen other organizations promotes such banks, but the names of those organizations escape me at this time.

Mackey also suggests playing such board games as Life or Monopoly as tools to teach kids about money. These games can helps kids learn about investing and stocks and even how money compounds and grows in a fun and entertaining way.



Photo courtesy of Shirleys-Preschool.com
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News of the Day

There are several news items today, that are of interest to personal finance readers. Instead of writing two different articles, I thought I would combine it into one (1) article. So without further ado, lets get started.

Congress & Higher Food Prices

This is the story that has the quote of the day.

"Why are we putting food in our gas tanks instead of our stomachs?"

That is what Richard Reinwald, a bakery owner, asked a Congressional panel investigating rising food prices.

An Agriculture Department economist told the panel that the use of food crops for alternative fuel is one reason for higher prices. He says other factors include global weather patterns and the declining value of the dollar.

But the White House downplays the role of ethanol. A spokesman points to the increasing cost of energy that makes it more expensive to get food to the table.
- KGAN 2 CBS

No matter the reason, people in supermarkets and grocery stores all over the United States are seeing their grocery prices rise. Here in Topeka shoppers, this week, seen a 48 oz bottle of Wesson Oil go from $3.69 to $6.59.

Government launches crackdown on unfair credit cards

WASHINGTON - The Federal Reserve and other regulators are moving Friday to crack down on "unfair and deceptive" practices in the credit card industry that have added billions in debt to people already struggling to cope with the economic downturn.

In the most far-reaching crackdown on the credit industry in decades, the Fed and two government agencies are proposing rules that would stop credit card companies from unfairly raising interest rates and make sure they give people enough time to pay their bills.

The banking industry is expected to fight the new rules.

- from the AP Newswire

Wow, I really like this idea. At least part of me does. The part of me that fights for consumers rights and protection of the consumers. Then there is the part of that supports smaller government, and I wonder why the government is getting involved. Still, though the smaller government part of me is overshadowed by the desire to protect the consumer from those business' that wish to take advantage of the poorer consumers. I am for "free trade," if you will, but at the same time, business' must be fair in their business practices.



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Was Jimmy Carter Right on Economics?

In the past 2-years I have read much about American consumption. The dreadful decline in our savings savings as we spend more then we earn. With each year, it seems to get worse. Is it any wonder, that our economy is beginning to collapse? You can support the economy for only so long, before over spending will fall in top of you. Look at from a personal angle. If you earn $30,000/year but spend $35,000/year, how long do you think you can do that, before you fall financially. Eventually, you either have to cut spending or file bankruptcy (and cut spending). Back in 1979, Jimmy Carter tried to warn us.

In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we've discovered that owning things and consuming things does not satisfy our longing for meaning. We've learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.
- Jimmy Carter, 7/15/1979

Carter's speech, which you can read in it's entirety online, as well as his pessimistic attitude was so unpopular (his popularity was only 25%) that he was defeated in a landslid by Ronald Reagan, in 1980. Since then, no President of either party has dared talk about our over consumption. Instead, they have tried to pump it up.

In the same speech, Carter said,

The symptoms of this crisis of the American spirit are all around us. For the first time in the history of our country a majority of our people believe that the next 5 years will be worse than the past 5 years. Two-thirds of our people do not even vote. The productivity of American workers is actually dropping, and the willingness of Americans to save for the future has fallen below that of all other people in the Western world.

As you know, there is a growing disrespect for government and for churches and for schools, the news media, and other institutions. This is not a message of happiness or reassurance, but it is the truth and it is a warning.

These changes did not happen overnight. They've come upon us gradually over the last generation, years that were filled with shocks and tragedy.

We were sure that ours was a nation of the ballot, not the bullet, until the murders of John Kennedy and Robert Kennedy and Martin Luther King, Jr. We were taught that our armies were always invincible and our causes were always just, only to suffer the agony of Vietnam. We respected the Presidency as a place of honor until the shock of Water gate.

We remember when the phrase "sound as a dollar" was an expression of absolute dependability, until 10 years of inflation began to shrink our dollar and our savings. We believed that our Nation's resources were limitless until 1973, when we had to face a growing dependence on foreign oil.

Over the years, I criticized the Carter administration. It was however, Reagan, who got me interested in politics. Even though I loved how Carter has helped the poor through habitat for humanity, since leaving office. However, as watched the documentary "Affluenza," and now locating Carter's speech, I have even more respect for at certain aspects of his administration. We are beginning to see more then ever the very things Carter was trying to warn us about 29-years ago.

The answer to correct it, is simple. All though, it is an unpopular idea. Cut spending. Live on less then you make and put the remaining into savings.



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