April is financial literacy month. The TIAA Institute recently conducted a survey on U.S. financial literacy, asking 28 basic questions about retirement saving, debt management, budgeting, and other financial matters. The average respondent answered only about half of the questions correctly.1 This survey demonstrates that too many Americans lack the knowledge needed to make informed financial decisions. Is it any wonder then that many will not be financially successful?
If you are a parent or grandparent, consider how you can provide the children in your life with the foundation for a successful financial future.
- Help them understand what money is and how to make wise spending decisions. Make sure you are modeling good spending habits for them as well.
- Allow kids to earn their own money and save up for the things they want. This allows them to make financial mistakes (and learn from those mistakes) on a small scale before they reach the real world.
- Consider making loans with interest to older children. Make sure they stick to their payment plan and don’t be afraid to ‘repo’ their purchase if they cannot make payments. This can be a great way for them to learn how to use debt wisely, how interest works, and the importance of not overextending themselves financially.
Fortunately, there are many resources available to increase financial literacy. One of these is the Financial Literacy & Education Commission sponsored by the U.S. Treasury (mymoney.gov). The website has a dedicated section for youth as well as financial tips for adults. 1.TIAAInstitute.org, 2020