Being the largest economic powerhouse across the globe, our country has been basking in its glory ever since it emerged victorious in the World War II. And people like us don't rest on our laurels and are known for pushing our limits beyond the impossible, thus we've got eight out of ten world's best universities. Needless to say, we've got the highest number of medals in 2012' Summer Olympics too.
Unfortunately, we are yet to catch up with our peers in matter of mass financial literacy and that we're stuck with a mediocre grade, as found in the July 2014 report published by the Organization for Economic Cooperation and Development (OECD).
What was the study about?
In order to calculate the financial literacy of the global teen population, the OECD approached 29,000 15-year olds from a list of 18 countries as well as economies to answer a questionnaire prepared by them based on personal finance topics. The topics ranged from reviewing their credit card statements to understanding a purchase invoice to the cost of long-term loans.
The result from this study placed U.S somewhere between 8th-12th position and that it said to be right in the middle of the rankings prepared by the researchers. What is worse here in this regard is that one in six U.S. students couldn't reach the baseline (qualifying mark) of proficiency in personal finance literacy.
The head of Bank of America or BoA's Corporate Social Responsibility and Consumer Policy has voiced his concern over such dismal revelations about his country's younger population. Being a father to three lovely children, all these latest data troubles him and that he could foresee the pathetic outlook the upcoming generation would have toward their personal financial well-being and their handling of various financial responsibilities.
After coming through all this, only one question that crosses his mind and that is 'how Earth would I lay a strong financial foundation for my kids'. When he tries to follow though his plan, either people at the receiving end gets annoyed with him or at the least they end up being confused. So, the anxiety that he's going isn't a one of its kind case, rather its the same with many other parents too.
The BoA was rattled with the study's outcome and that in part led it to come up with a fresh idea and thus, the BetterMoneyHabits.com was born. The website was floated in partnership with the Khan Academy - a non-profit organization seeking to impart free world-class education to all. Websites like these provide useful content to make life of all their readers easy and comfortable. That said, you could learn the ropes of smart money management by going through some of them, covering all diverse topics related to the fundamentals of personal finance.
What action plan will suit your children?
Here are the basic tenets of financial literacy to harness wiser money management skills in your children:
- Always start with the basics - Work toward building a healthy relationship of your child with money. To meet that end, you can have your children speak up in front of you about everything that they are thinking or are planning to do with money and counsel them accordingly. But it should be done in a candid way. You know in your mind that you'll not always be there to support them financially, but is it the same with your kids? Its has always been worth the trouble in having kids manage their own money right from an early age. Make it a point to sit with them and let them know how to use their monthly allowance, birthday cash or the paycheck from a part-time job for good cause. Just try to ease off their anxiety when they plan as to what they should be doing with the windfalls.
- Be an example for your kids - Get your kids engaged into handling first-hand financial crises with you. You may ask them to assist you in mapping out a savings plan to raise a certain amount of money for an upcoming event like Christmas or to go for a short leisure trip. In this case, a checking account (if your children have one each) will help them to track the amount of money going in and out in a given week. The same goes with you too. However, for this your children must fulfill the financial institution's eligibility criteria to hold a checking account. Through these interactions, you'll be able to instil a crucial life skill in your children.
- Have your financial house in order - Last but not least, always remember that "Good advice is something a man gives when he is too old to set a bad example". So, before you teach and advise your children about the nuances of managing money and spending responsibly, you should follow them first. To brush up your own personal finance knowledge, you should take the questions asked by the OECD and answer them. If you come out with flying colors, then you can expect the same from your kids.
Therefore, you should calculate the amount you've spent out of your salary and have the terms like gross and net pay explained to your children. Moreover, tell them the adverse effects of spending everything that you earn before they start getting their own paychecks.
