Fighting Financial Illiteracy

In an article titled, “Why Financial Education Adds Up,” CNBC reports that students aren’t getting the financial education they need to be successful in the real world. This information was concluded from the 2012 PISA Financial Literacy Skills survey, which surveyed children from 18 countries, including the United States.

Unfortunately, the survey concludes that more than one-in-six American students do not reach the “baseline level of proficiency in financial literacy.” The survey also determined that all students, including international students, aren’t able to identify transaction costs, nor are they able to determine their balance while accounting for transfer fees. This is great news for banks looking to make a quick buck on fees, but terrible news for our nation’s youth who will need financial literacy after graduation.

Without proper guidance, how are graduating children going to balance a checkbook, apply for a mortgage, and keep credit card debt in check? “…you would think that a few lessons in financial management at school would be a key part of the curriculum,” writes CNBC reporter, Alice Tidey. “However, in many countries this is not the case.” Unfortunately, the United States is one of those countries.

America has been lax on implementing financial education in the classroom, and thus students are left incapable of making sound financial decisions later in life. To put it simply: young adults are ill-equipped for the realities that face them upon graduating, and thus they’re more likely to fall victim to debt and financial ruin.  

The big question is: What can families do to help children become more financially literate, and thus set themselves up for a more rewarding future?  

PARENTS CAN LEAD BY EXAMPLE

CNBC interviewed Adele Atkinson, a policy analyst for the OECD (Organization for Economic Co-operation and Development), and she admits that there evidence to suggest that financial educated parents have financially literate children.

Don’t wait for your school’s administration to do the right thing and finally teach financial literacy. Teach it to your kids yourself.

·  Set your kids up with a savings account (or a piggybank)

·  Let them help you balance your checkbook

·  Give your children an allowance, and talk to them about saving and spending

THE INTERNET CAN HELP

The Internet is home to a wealth of information, including how to talk to your kids about finances, and how to become more financially literate yourself.

Remember: becoming educated yourself is the first step toward educating your children.

Seek out information from professionals, and avoid information that isn’t cited or from a trustworthy source. For example, Lexington Law is the nation’s leading credit repair firm, and their site also features a comprehensive credit education department where you’ll find helpful information to share with your children.

PRACTICE WHAT YOU PREACH

It’s a good idea to sort out your personal finances, not only to provide your children with an example of financial literacy, but also for your own financial security. Pay off bad debts, make good spending choices, and create an emergency savings account. Share your credit report with your kids, and if something is incorrect, don’t be afraid to send out credit dispute letters whenever necessary. By providing your children examples of smart finances, you’re better preparing them for the future.

THE BOTTOM LINE

As a parent, your bottom line is always to provide your kids with a good foundation. Unfortunately, the school system isn’t providing your kids with the financial literacy they need for long-term well-being. In order to ensure your kid’s success, you’ll need to step up and show them how to manage their money.