Are You a Financial Role Model?

Thirty-four percent, or nearly 77 million people surveyed in the 2010 Financial Literacy Survey by The National Foundation for Credit Counseling’s (NFCC), gave themselves a grade of C, D or F in financial literacy. Meanwhile the same survey revealed the
majority of respondents, 41%, said that their parents were most influential on their financial skills.

You might draw two conclusions from these findings: 1) most people are not confident in their financial skills, 2) parents haven’t successfully taught these skills to their children.

There is enough parental guilt in the world and so it is not the point of this blog topic to say that parent’s have failed. Many hidden factors come into the second conclusion, including periods when social norms discouraged talking with
kids about money. It’s probably easier to believe that parents unwittingly pass their own lack of skills on to their children, thus, causing a cycle of poor financial literacy. You can stop the cycle and improve your financial literacy grade.

So, the obvious conclusion from the NFCC study is that financial literacy begins at home. Another study by CreditCards.com concluded that more people credit their mothers for teaching them about money. Umm, let’s not even speculate about whether that’s been a good education or not. But we can say that this has a lot to do
with how children collect information about money.

Patricia Seaman, a spokeswoman for the National Endowment for Financial Education, says “Moms do handle a lot of the day-to-day spending decisions, and that’s what kids see.”

Ms. Seaman goes on to say, “When they’re young, they are dragged to everything with mom, for school, shopping for groceries, for clothes, to the garden center and to the ATM. It’s not just spending decisions. They may also be exposed to
money handling habits, like using cash or credit cards or checks. Often during those trips, mom may be talking to themselves, saying things like, ‘This is on sale this week. Maybe this is a better product.'”

So this explains how our concepts about money are formulated. As we know a child’s brain is like a sponge, constantly absorbing information through observation. Or, monkey see monkey do. So, the best way to teach your child isn’t to sit
down and lecture them about interest rates and the dangers of debt, it is by setting a good example.

And   few action ideas:

  • Making saving a priority and share your savings goals with your children.
  • Let your children see how you organize your financial life. Let them see that you have a place for bills
    and important documents.
  • Let them see you using online banking to manage your finances and pay bills.
  • Make large financial decisions as a family. Explain the pros and cons of purchases such as a car, appliance,
    or vacation.
  • Don’t let money turn into an argument. Save heated discussions for when the kids are not around, but let
    them observe calm, healthy financial discussions.
  • Let them know you are planning for the future to help establish a sense of security.
  • Make charity a family affair. Choose a charity that the entire family can support and let kids
    contribute.
  • Monitor your own daily spending habits and improve your personal financial literacy.
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