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February 2008
Why Financial Literacy Counts
Earning money and knowing how to use
it wisely area arguably two of the most important skills
needed to survive on this planet. Yet, many of us have never
been formally taught the principles and practices of finance.
No wonder that personal debt in America
has reached record levels and that the number of young people
filing bankruptcy is increasing. Nineteen percent of all
personal bankruptcies are filed by college students.
The average student who graduates from high school lacks
basic skills in the management of personal financial affairs.
On a recent nationwide survey of high school seniors, 65%
of the students failed the financial literacy test. Yet,
one-third of the students surveyed use credit cards. Many
young people fail in the management of their first consumer
credit experience.
Studies show that if a child doesn't learn financial literacy
at home, chances are he or she won't learn it all. That's
why your role as a parent is key.
Tips
on helping your child to become financially literate:
What Parents Can Do
If you are the parent of a high-schooler:
- Have a conversation with your teen about
the real cost of life after high school. Share what you
know about rent, mortgages, taxes, health insurance, car
payments and saving for retirement.
- Explain the pitfalls of using credit cards. Do not
let your young teenager have a credit card.
- Encourage your child to take an economics or financial
literacy class in high school.
- Help your teen set short- and long-term financial
goals, and work out a budget with them when they get that
first part-time job. .
If you are the parent of a middle-schooler:
- Help your child open a savings account and
encourage regular deposits.
- Explain the advantage of “interest earned”
as opposed to “interest paid”.
- Talk with your child about managing a household. Demonstrate
setting a budget, comparison shopping, paying bills.
If you are the parent of a grade-schooler:
- Give your child a piggy bank, or open a
savings account for him or her. Explain the meaning of
saving money.
- Set a basic allowance, then allow your child to “work”
for extra money.
- Let your child make small choices about what to buy
with his or her own money.
It is important for children to learn how to make smart decisions
about money, beginning at an early age and continuing through
their school years.
For more helpful information on financial literacy,
visit: www.financialeducation.citigroup.com,
www.fpanet.org, and Jump$tart Coalition
FINANCIAL LITERACY: FACTS
FOR PARENTS
DID YOU KNOW?
Financial literacy is a big problem nationally.
Americans, as a whole, carry $800 billion in credit card
debt. Their understanding of how to manage money is decreasing,
not increasing. According to BusinessWeek.com, the amount
that Americans owe on loans for houses, cars, credit cards,
and other purchases add up to nearly 100% of their annual
income after taxes, up from 75% in 1992.
Source: msnbc.msn.com; Business Week online
8/3/2002
Most teens handle money poorly. In a survey
by Teenage Research Unlimited, teens said they spend 98%
of their money instead of saving it. Teenagers in the United
States spent $179 billion in 2006. Fifty-three percent of
parents agree that their child thinks "money grows on trees."
Source: Teenage Research Unlimited 2006,
networksfinancialinstitute.org
Most high school seniors are not financially literate.
In a 2004 nationwide survey of 12th graders on the basics
of personal finance, 65% of the students failed the survey.
On average, students answered almost half of the questions
incorrectly.
Source: JumpStart.org
One in five bankruptcies is filed by college students.
96% of college students use credit cards. Fifty percent
of college students are in credit card debt. The number
of young people (18-24) filing for bankruptcy had doubled
in the last decade. College students account for 19% of
all personal bankruptcies.
Source: BankruptcyReader.com
Parents are the biggest influence on students' attitudes
toward money. According to the 2004 Jump$tart survey,
nearly 60 percent of students said they learned most of
their money management skills at home.
Source: JumpStart.org
Parents feel inadequate to help their child learn
about money matters. Among parents with children
5 or older, only 26% feel well prepared to teach their kids
about basic personal finances.
Source: networksfinancialinstitute.org
Excellent tips for parents & high school/college
students
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