As millions of baby boomers face the prospect of not having enough resources to retire, they likely are haunted by one thought: "Why didn't I learn to manage my money much earlier in life?"
Teaching financial literacy to today's children at an early age can help future generations avoid similar mistakes, says Bryce Jorgensen, assistant professor of child development and family relations at East Carolina University's College of Human Ecology in Greenville, North Carolina.
Jorgensen says parents play the primary role in instructing their children to spend wisely. But because so many parents lack good financial management skills, schools also must help kids learn to manage their money effectively.
In the following interview, Jorgensen offers some tips for passing on money management lessons to children.
How important is educating students about money management?
Educating students about how to effectively manage their money is imperative. How we manage our money influences many aspects of our lives -- marriage, children, where we work, how much we pay in interest, whether we can get a loan, how much debt we are in, a comfortable retirement.
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Student loan debt is $1.17 trillion, according to the Council for Economic Education's "Survey of the States." This is more than the national credit card debt! The following stats also come from the survey:
- 30% of college students with loans drop out without a degree.
- Members of the class of 2011 graduated with an average of $26,600 in student loan debt.
- One-third of parents are more comfortable talking with their kids about smoking, drugs and bullying than about money.
In addition, the survey found that students from states where a financial education course was required were:
- More likely to display positive financial behaviors and dispositions.
- More likely to save.
- Less likely to max out their credit cards.
- More likely to pay off credit cards in full each month.
- Less likely to make late credit card payments.
- Less likely to be compulsive buyers.
At what age should schools start teaching about basic personal finance topics?
Schools should begin having kids read kid books about money, saving, delaying gratification -- using words kids understand, of course -- tracking spending, etc.
Schools should use money examples in multiple courses -- math, English, etc. Kids should learn starting in kindergarten and continue into college.
Do you believe parents have a responsibility to teach their kids about money and finances?
Yes! It is the parent's responsibility to teach their children about money.
The problem is, many parents don't know correct money management skills or knowledge to pass on to their kids. Rather than teaching them explicitly by explaining a budget or delaying a purchase to save, they avoid the topic and the children learn implicitly through their examples, which isn't always good.
Most of the time, (when) children hear about money from their parents, it's about not having enough, or they are arguing about money. This can have negative effects on the child's attitude about money.
Is educating students about money management the responsibility of a school?
It isn't the responsibility of the school, but it is where most children can learn about money management and gain the skills needed in an increasingly complex economic world.
Should it become a requirement to pass a financial literacy class to graduate?
I think mandating a financial management class would be helpful, and it has been shown to be effective in influencing attitudes, which then influence financial behaviors.
We need students to not use payday loans, (and instead) to save for the future, to have an emergency fund, to save and pay cash for things, to track their spending and plug spending leaks, to take out fewer loans for college by borrowing wisely.
How can parents and teachers encourage kids to start saving money? What benefits would they gain from it?
Learning themselves what should be taught and then modeling that behavior (is good). They can read the books, use the free online tools and talk to their children about wisely managing their money.
Rather than spending money as soon as you receive it, think about what you want in the future and save for it. Divide the money into long-term savings, short-term savings, and spending money.
Parents and teachers want the children to be productive citizens in society who can be self-reliant and smart with their finances. Children will also be less likely to boomerang back to live with their parents if they learn how to manage their money wisely before college and while at college.
Copyright 2014, Bankrate Inc.