What do you want to leave your loved ones when you die? Forget about leaving your children a large inheritance or a vacation home after you pass away. Leaving your children with a strong financial education is a legacy that is far more important than material wealth. A recent study conducted by Capital One found that 93 percent of teens are not involved in paying bills or managing the household budget. 43 percent of those surveyed do not even know how to create a budget. Furthermore, only four states mandate that students take a personal finance class in their K-12 education requirements.
Given this information, parents need to realize that it is their job to teach children about finances. This can be a challenge for many parents that feel they may not be qualified to be giving financial advice. However, here are some simple ways that you can teach your children, both young and old, the importance of being financially responsible.
• Open a savings account for your child. Many banks and credit unions have special programs for children. You can often start by putting only $5 into an account. The amount of savings is not important. What is important is that your child understands how a savings account works, and that he or she can begin to save money one dollar at a time.
• Teach your child to keep a budget. This can be done in a simple trip to the grocery store. Give them a set amount to buy all of the groceries for the week with. As they add items that are on your shopping list, have them keep track of total amounts and what is left over. This will teach them the value of money and the importance of budgeting for items they want and need.
• Involve your child in financial conversations. You might not want to involve your child in every aspect of your finances, but you can start by telling them how much your rent or mortgages is, how much you pay for your car insurance, utilities, and other important monthly expenses. With enough conversation, they will begin to understand the costs associated with raising a family.
• When they are old enough, teach them how to pay bills. Just as you teach your child to do laundry and cook, you need to teach them how to pay bills. When I was young, my mother bought me a fake checkbook so that I could pay my pretend bills and balance my pretend budget. In the world of online banking, you may want to instead teach them how to track their expenses online and pay utilities, credit cards or whatever other expenses you may have.
The United States is home to increasing debt and decreasing savings. According to the Federal Reserve and the U.S. Census Bureau, the average U.S. household has $3,800 in savings and $117,951 in debt (including a home mortgage). In this time, it is more important than ever to teach your child proper financial responsibility.
Kyle Hawkey is a senior program coordinator for the University of Arizona and an associate professor at Arizona Western College. He can be reached at firstname.lastname@example.org.