Financial literacy is a gift which can last a lifetime. Only 1 in 6 students will be required to take a personal finance course before earning a high school diploma, according to nonprofit Next Gen Personal Finance. I love when clients bring in their children (young and old) for review meetings and I can make a generational connection. Seeing their parents making financial matters a priority, gives children a firm base to grow their financial knowledge. Here are some basic tips and topics to discuss with your children.
The Roots of Retirement
Personal finance experts say we should let our children know that retirement is the biggest expense they’ll ever save for, and it’s important to start early. To help them understand the value of compounding, help them open a savings account (or guardian-type brokerage account) where they can experience the power of this phenomenon for themselves.
The Economics of Higher Ed
As they get closer to about whether to attend college or trade school, help them think through the costs and benefits. Junior Achievement’s Access Your Future app can help them crunch the numbers. If you have a child already attending college, know timing is everything. Yale researchers have found that graduating from college in a bad economy has a lasting negative impact on wages – and many students are considering gap years and grad school because of this.
Extra Credit Knowledge
When you’re young and don’t have much money, it’s easy to rely too much on credit and jeopardize your financial future. Help your child understand the importance of a good credit score and explain how you keep yours up. Share stories about how you financed your first car or house and explain in concrete terms how the interest rate affected the overall purchase price.
Finally, consider adding your teen as an authorized user on your credit card and teaching them how to read a statement and pay the balance in full each month.