Finance not just mathematics; it’s all about language
BY ARKARDI KUHLMANNM President/CEO of I NG DIRECT USA
Parents are often more comfortable talk- ing with their kids about sex and drugs than basic finance. As astonishing as that sounds, it's exactly what a brand new survey from my company, ING DIRECT, found after ex- amining the financial education habits of hundreds of moms and dads across the coun- try.
Nearly a third (32 percent) said they were prepared to talk with their kids about drugs and alcohol. Roughly three in ten (28 per- cent) were prepared to discuss sex and dat- ing. Yet just 26 percent reported being able to talk money and finances with their chil- dren.
This doesn't bode well for America's fi- nancial future. Parents are a key source of information about personal finances for chil- dren. Establishing good habits early in life is critical to healthy money management in adulthood.
Parents appreciate this. Our survey found that a full 95 percent believe they're prima- rily responsible for their child's financial ed- ucation. Yet less than a third - 29 percent - actually consider themselves "excellent" fi- nancial role models.
Combine these findings and a desperate picture emerges - many children are being deprived of the knowledge needed to de- velop basic financial literacy skills. Fortu- nately, there are a number of easy ways for parents to impart the basic tenets of good money management.
Consider allowances. Children shouldn't receive cash each week for simply mowing the yard or walking the dog. Instead, al- lowances should be used to introduce your child to saving - starting with a piggy bank and eventually graduating to a proper sav- ings account. Along the way, explain how and why you personally save - and teach your child about the magic of compound in- terest.
Financial education can also be tied into traditional school. Once a child starts lean- ing basic arithmetic, use personal finance examples to familiarize him or her with im- portant concepts.
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Of course, finance isn't just about mathe- matics, it's also about language. A credit card agreement, for instance, can be chock- full of opaque provisions that require a close reading to fully understand. So once your son or daughter moves up to critical reading classes in school, teach them how to trans- late those skills to documents typical of fi- nancial life, like checking account terms, credit card agreements, and mortgage paper- work.
Help your child create a monthly budget that tracks earnings, spending, and progress toward long-term goals. Ultimately, it's your responsibility as a parent to enforce the terms of that budget and help them stave off impulses toward short-term thinking and spending sprees.
The next step is helping your child estab- lish a checking account and get a debit card. Don't just pick an account for your child - have them join you in the selection process. And explain what features they should be looking for, like no minimum balance re- quirement or monthly fees.
Keep your child away from a credit card for a long as possible. Plastic makes it too easy to violate a budget and accrue debt. But once it is time for them to get a card, explain what goes into a credit score, and how a low rating can make it difficult to get a car, apartment, or even a job. Finally, introduce your child to investing, starting at an early age. Avoid the all-to-pop- ular practice of buying them a government bond for Christmas or a birthday, and then immediately filing it away with little expla- nation. Start by setting them up with a custo- dial account. Then purchase your child a handful of stocks, ideally in a company they interact with regularly. Help them track the stock's progress by following relevant news stories and checking the price regularly in the newspaper or online.
Biz/Sex, drugs and stocks ‘n’ tolls
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