By Gregg Murset
If you haven’t heard the famous stand-up comedy routine of Jeff Foxworthy I would suggest taking a few minutes to pull some one-liners up on the Internet before reading the rest of this piece. Foxworthy has worked extremely hard building a successful career by making jokes about real-life situations, as well as a particular class of people who might be called by some “Rednecks“.
As millions of YouTube videos will verify real-life can be very funny. However, it can also be very hard, especially if you aren’t prepared for it. Recently, numerous studies have come out supporting what many of us already see as parents – kids not prepared to make financial decisions they will be forced to make as adults. Add to this a growing generation of kids with a poor work ethic and growing sense of entitlement, and many believe our economic future is in deep trouble.
Right now in the U.S. kids aren’t learning enough (if anything at all) about basic finance, even though these are skills they would use the rest of their lives. Depending on where your high school kids go to school, they may be required to take a combination of foreign language, high-level math (algebra) and high-level science (anatomy) in order to graduate. Why not finance?
Is learning how to speak French more important than learning about interest rates and credit cards? Is figuring out the value of X more important than knowing how to plan a monthly budget or saving for retirement? Is dissecting a preserved animal as critical as understanding the differences between loans and how inflation affects us all?
April is National Financial Literacy Month in the U.S. providing a great opportunity for all of us to evaluate if our children are learning the basic financial information that will help them save, share, budget and make smart money decisions as adults. According to a 2013 report by The Center for Financial Literacy at Champlain College on the financial education in each state, only 20 states received a grade of A or B. A debate is now being held in almost all states over whether or not a standalone finance course and a test should be required for high school graduation. I’m not sure why it’s even debatable. Personal finance knowledge will be used more any other knowledge set throughout a persons lifetime. It’s a no-brainer!
So what if you have a child between the ages of 5 and 17 and you are concerned with what he or she knows about earning, saving, sharing, spending and budgeting money? Is there a way for a parent to tell if there is trouble ahead? Just watch out for these signs that your child could be heading toward financial failure and take corrective action at the first sign of trouble.
Your Child Could be Heading Toward Financial Failure If He or She:
Says That Buying a Lottery Ticket is Their Retirement Plan
The odds of winning the lottery is somewhere around 1 in 259 million. This is not a retirement plan, this is the worst kind of gambling- almost zero chance of winning! If your child thinks this is a good way to plan for the future, just start planning now to have them living with you during your retirement!
Spend More Time Watching TV or Playing Video Games Than Helping Around the House
Get your children off the couch or out of their room to do their share around the house. Besides building a daily routine, they will develop a good work ethic, demonstrate responsibility and make your life easier. As they develop a work ethic they will start figuring out that work equals money most of the time and will want to start earning more money.
Is Older Than 7 But Still Putting Money Into a Piggy Bank
While piggy banks can be a cute way for a youngster to learn about nickles and dimes, what purpose do they serve after that? Almost none! If your children are old enough to earn money they are old enough for their own bank account. It’s a great opportunity for them to learn how a bank works, use online banking and begin to understand interest (though it’s not what it used to be).
Thinks Credit Cards are Free Money
Some kids think that credit cards represent free money banks give away for people to buy things. As we all know now, there is nothing free about credit cards. Until your children have a clear understanding of how cash advances interest rates, penalties and fees mean, they shouldn’t have one. Be sure you are teaching your children the difference between a debit card and a credit card by discussing the ins and outs when you use them in front of your kids.
Learns About Finance From Comic Books
A year or so ago, one of the largest financial institutions offered a comic book where a well-known superhero fought a villain over bad financial decisions. As parents, are we really that afraid of communicating with our kids about financial matters that we would rather leave it up to comic books and animated characters? If your children can’t learn about this important subject in school, let them learn from your experiences. You can become the superhero.
Has a Fall Back Plan of Moving Back Home if the “College Thing” Doesn’t Work Out
OK, so this is a bad news – good news situation. The bad news is that 71% of college dropouts move back home with their parents because of money woes or inability to find a job. The good news is that 97% of these “boomerang” kids are willing to doing chores around the house to help out. They better be their options are running thin!
Thought That the Term “National Debt” was the Title of a Nicholas Cage Movie
While most teenagers have some idea what the National Debt is, a majority have no idea what it means to them. As of right now, our National Debt stands at over $16 trillion, (that’s twelve zeros people!) meaning a baby born today is $51,501 in debt. Tell your children that they owe you more than $51,000 and see what reaction you get. Helping kids to understand how this number affects them is the first step to managing it.
They Think that Budget Refers to a Rental Car Company
According to a recent Gallup Poll, 67% of American adults don’t have a monthly budget in place or a long-term financial plan. Since kids learn a great deal by watching what their parents do it’s important for you to set a good example for your children and budget. Also, share the budget with them so they have a better understanding what constraints there are and how they can help meet family goals.
Swears that the Term “Interest Rate” Means How Popular Something Is
Definition Alert…An interest rate is the rate at which interest is paid by a borrower (debtor) for the use of money that they borrow from a lender (creditor). The best way to remember how interest rates work is the rate will most likely be high when you are paying back money and low if the bank is paying you money. Talk to your kids about interest rates in regards to credit cards and car loans since they will come in contact with those first.
They Are Over 25 and Still Getting an Allowance From You
Houston, we have a problem! If your child is about 25, living at home and still asking for an allowance, you should be telling your child one thing … move out and get a job! Of course there could always be some circumstances that provide a real reason why a grown child is at home without a job or income, but it better be a good one.
They Turn Down A Good Summer Job Waiting For The Perfect Job
While summer jobs have been more difficult to come by with the recent decline in the economy, kids who really want to work always find a way. Even though it might not be the perfect place, it’s a job. If they want more opportunities, help your child decide summer plans early since summer jobs fill up fast depending on where you live. Also, get them to understand that not all summer jobs are glamorous. To ease their pain, tell them if they are saving for college or a car, you will match their pay as an extra bonus for being responsible.
Many of these financial doom warning signs can be used to avoid a negative future if you start your children early on a routine of completing jobs around the house and rewarding them with an allowance or by another means. By starting around the age of 5, kids can learn work ethic, responsibility, accountability and how to manage money wisely. Using an educational tool like MyJobChart.com will help parents assign jobs, motivate kids and reward successfully completed jobs. Kids use the same technology (smartphone, tablet or laptop) they spend hours on now to see their daily schedule and decide how to save, share or spend their rewards.
No matter how you decide to position your children to be successful financially as they grow remember that education, communication and hard work must be part of the plan. Otherwise, we’ll end up with a generation that thinks the Debt Ceiling is the maximum amount that can be charged to their credit card. By the way, it’s not.
Gregg Murset, CFP®, is the Chief Executive Officer of My Job Chart, which was born from real life experience. Murset is a father of six children (ages 6 to 16) and needed a way to teach them about earning, saving and spending money. With no system available for a family with a large range in ages, He came up with the idea to combine modern technology with the traditional allowance system to teach responsibility, accountability and the fundamentals of financial literacy.