Don’t Wait For Schools, Teach Your Kids These Money Terms
Every year in the U.S. millions of teens graduate from high school with absolutely no knowledge surround basic finance. I guess this explains why we (the U.S.) rank 14th globally when it comes to financial literacy. So why in the world would we not be teaching our kids about the one thing they will use everyday – MONEY?
Back in the day when I went to school (during in the 70’s), I remember spending at least half a school year learning about finance and world economics. There was even time spent studying the stock market by making fake investments and following their trends. While the classes weren’t easy, I can honestly say the basics I learned have served me time and time again. Too bad my daughter, who graduates in two months, won’t have the same opportunity.
Now I could make this piece about the lack of education on the single most important subject our kids should be learning, but it wouldn’t change a thing. Changes won’t happen until funding is tied to the results. Instead, I want to focus on what parents should be doing to fill the big hole in our kids’ brains when it comes to earning, saving, sharing, spending and investing money.
So here are some basics terms your kids need to understand before taking on the real world. Let’s be clear, they will still make mistakes and bad choices, but heck, no one is perfect. You can teach someone to ride a bike but they still might crash, right? However, I promise if you drive home these following points, your child will have a fighting chance to not being back living with you at the age of 30.
- Modern Money … Yes, dollars and cents are still used, but not as much as you think. It’s estimated that less than 10% of the currency in the world is actually paper or coins. Everyday technology is introducing new ways to move money from device to device. This means your child needs to know how to manage invisible money, including paying bills and ensuring accounts don’t hit zero
- Saving Money … Seems simple but 39% of Americans admit to having zero in a savings account. 57% say they have less than $1000 in a savings account. As soon as you can, teach your child to take a portion of any money they get (birthday, holiday, babysitting, mowing grass, etc.) and place it in a savings account. As a rule, 50% should go to savings. (40% to spend and 10% to share.)
- Share Money … Contributing to non-profits not only makes you feel good but helps others in need. It can also provide a tax benefit when your child begins filing. Teach them that 10% of what they make should be set aside to “share” with others.
- Investing Money … If your child ever wants to retire, he/she will need to invest money somewhere along the way. Lucky for them there are plenty of resources available to teach them how, including some fantasy investing games which would allow them the chance to invest pretend money. Practice makes perfect … or at least better educated.
- Compound Interest … Always take advantage of compound interest. Compound interest is when a bank pays interest on both the principal (the original amount of money) and the interest an account has already earned. As an example, if you put $1000 in the bank with compound interest of 10%, in 20 years the $1,000 would be more than $7,000. Without compound interest, it would be $3,000.
- Credit Cards … This is not free money! Have one card for emergencies or travel, but make sure the annual percentage rate is low and it is paid off each month. Your kids will be flooded with credit card offers as soon as they are old enough (and really approached when they hit college), so teach them to say no, even if they are promised gifts for signing up.
- Student Loans … Seems like a great idea at the time and everyone has a plan to pay them back, but currently the U.S. student loan debt is $1.45 trillion (average of $37,000 per student) and nearly 7 million loans are in default. Have your child follow this simple rule - don’t borrow more than they would earn in their first year out of school. In other words, if your child is going to make $24,000 as a first-year teacher, don’t take $50,000 in loans.
This is just the tip of the iceberg, but it’s exactly the reason why our children should be learning this in school. My one article won’t solve the problem, but maybe someday our schools will decide that preparing kids for real life is better than just passing them along in subjects they will never use again.
The co-founder & CEO of BusyKid, Gregg Murset, is best known as groundbreaking inventor of My Job Chart which grew to nearly 1 million members in four years. My Job Chart was the first electronic chore/allowance platform to take advantage of our modern digital society. A father of six, Gregg is a certified financial planner and consultant who also became a leading advocate for sound parenting, child accountability and financial literacy. In 2014, he was named Chairman of 2014 “Smart Money Week” for the state of Arizona, as well as, the National Financial Educators Council Financial Education Instructor of the Year. A firm believer in improved financial education in schools, Gregg has conducted hundreds of media interviews around the U.S. in hopes of much needed change. Promoting these changes, Gregg took his family on a pair of RV trips in 2014 and traveled nearly 10,000 miles in just 31 days. When the trips were complete, the family had stopped in 22 different cities in 27 states and performed normal household chores for families in need and organizations requesting volunteers. Gregg is considered a pillar of his Arizona community and is regularly attending his kids sporting events or taking them on weekend camping trips.