So what should you do? How can you go about teaching your kids about personal finance?
As we launch into National Financial Literacy Month, here are seven ideas:
- Talk about it. Discussing household finances as a normal part of everyday life is a great way to get children involved with the practicalities of budgeting, saving and investing.
- Turn rites-of-passage into lessons for life. Milestones like a first job, a driver's license and a credit card represent excellent opportunities to talk about financial realities and pass along your own financial values and wisdom.
- Give your teen an allowance and some real financial responsibility. An allowance should be more than a way to provide your kids with pocket money; it can be an opportunity for them to practice budgeting, to cultivate the habit of saving and to make mistakes.
- Encourage them to get a job. One of the best ways for a teen to learn about the worlds of work and money is to take a part-time and/or summer job. Earning their own money gives teens a tremendous sense of accomplishment - having money allows them an opportunity to save and budget.
- Teach them about financial tools like checkbooks and credit cards. Just 30 percent of the survey's respondents said their teens had a savings or checking account. Open one for your kid. Give them a credit card (you can start with a very low credit limit) and teach them to use it responsibly. Consider establishing a small custodial account to give them hands-on experience with investing.
- Instill the saving habit. Saving money can be habit-forming so cultivate the idea with your teens to make it as automatic as brushing their teeth.
Some parents give their kids an incentive by matching a certain percentage of any voluntary savings. Help them formulate a mix of short-term and long-term goals, providing the savings process with objectives.
- Show them your money. Consider giving your teens a statement from a 401(k) plan or IRA account to make investing more concrete, and to teach them about the retirement challenge and investing basics.
Personal finance isn't rocket science, but most schools don't teach it - the burden on parents. Start the money conversation. Your teens will soak up the knowledge since they are interested in money. You'll get them started on the path to financial confidence and, ultimately, financial independence.