One thing parents are routinely worried about is their child’s understanding (or lack of) financial responsibility. And rightfully so, surveys show that half of Americans between the ages of 18 to 34 couldn’t come up with $2,000 for an emergency, and only 14.6% of college students with a credit card know their interest rate.
Scary to think that many young adults display a clear misunderstanding or lack of competence when it comes to even the most basic financial planning skills. Very few states have comprehensive personal finance as part of public school curriculum, so it is essential that you start teaching your children about money from an early age.
When it comes to getting your kids to care about money, actions speak louder than words. An October overview study that will be published in Management Science looked at 201 studies of financial literacy education programs and found that they are in general, worthless. A student who takes a financial literacy course is not significantly more likely to make good financial decisions than a kid who skips the class.
When it comes to money for young people focus on modeling behavior. If you ask a young student what they learned from their personal finance teacher they will probably look at you blankly, but ask them what they learned by watching their parents and you will find that the connections are very real, vivid, and emotional. So what are some ways you can teach those youngsters about money that will be effective into their adult lives? Courtesy of the professionals at BW James, here’s some tips:
Age Progression Software
Seems a little weird, but downloading a virtual reality experience that uses age progression software to project a child’s virtual self into the future gives them a better understanding that they will eventually grow up. And studies show that children who are exposed to age progression software no longer have a dissociative view of their future self and on average allocate twice as much to their retirement accounts as children who did not use the software.
Incentives
Explaining to your children how compound interest works is basically a waste of breath. Instead teach them how to save, and when they save their money, reward them by giving them more and less when they don’t. One of the rules for a weekly allowance should be that they have to save part of it and this will instill a saving attitude.
Let The Mistakes Happen
You’re teenager or young adult is fixing to make a mistake financially, what do you do? When the stakes are low enough, instead of talking them out of it, let them make the mistake and suffer the consequences. When you see your teen about to spend their money on something they’ll later regret, let them, learning through mistakes is part of everyone’s life and allowing it to happen early in life versus later is the best policy.
Be Honest About Your Mistakes
It might be hard to admit to your kid when you screwup, but the lessons you learned from it are just as valuable to them, if not more so. And discussing even the most mundane elements of financial planning can get them thinking about the trade-offs that come with every financial decision.
These are just a few ways you can help your children get a jump start in the real world. For more information about financial planning and the professionals at BW James visit
http://www.bwjames.com
