Good to learn money man­age­ment early in life

China Daily (Hong Kong) - - YOUTH -

NEW YORK — A part-time sum­mer job can teach teens the value of earn­ing a paycheck, but not nec­es­sar­ily how to man­age their money wisely.

That’s a job par­ents should take on, and the ear­lier the bet­ter, ex­perts say.

Learn­ing the ba­sics of sav­ing, fol­low­ing a bud­get and the prin­ci­ples be­hind re­spon­si­bly man­ag­ing check­ing and credit ac­counts can in­still healthy fi­nan­cial habits that will serve teens well as adults.

But many US teens aren’t be­ing taught these skills, ac­cord­ing to a re­port re­leased in May by the Pro­gramme for In­ter­na­tional Stu­dent As­sess­ment. The or­ga­ni­za­tion, which eval­u­ated fi­nan­cial lit­er­acy among thou­sands of 15-year-olds in 14 coun­tries, con­cluded that one in five US teens lack ba­sic-level skills, more than in Rus­sia, China or Poland.

“Fi­nan­cial lit­er­acy is a key com­po­nent to un­der­stand­ing gen­eral money man­age­ment and credit ba­sics, but a ma­jor­ity of Amer­i­can teens are not fi­nan­cially lit­er­ate,” says Heather Bat­ti­son, vice-pres­i­dent at credit re­port­ing com­pany Tran­sUnion. “This is why it’s im­per­a­tive for par­ents to have con­ver­sa­tions with their teens about money in or­der to start a good foun­da­tion for fi­nan­cial lit­er­acy and help pre­pare teens for fi­nan­cial in­de­pen­dence.”

Here are some ways par­ents can be­gin teach­ing their chil­dren money man­age­ment skills:

Start early

Teach­ing kids good fi­nan­cial habits can be­gin when chil­dren are around 5 years old, or when they typ­i­cally be­gin ask­ing for an al­lowance, ac­cord­ing to a guide for par­ents pub­lished by the Na­tional En­dow­ment for Fi­nan­cial Ed­u­ca­tion, a non­profit fo­cused on fi­nan­cial lit­er­acy.

Par­ents can ex­pect their child to spend their al­lowance all at once, but should use that as an op­por­tu­nity to dis­cuss how to treat the next week’s al­lowance, for ex­am­ple.

“There are many things that chil­dren will un­der­stand at ac­tu­ally quite a young age,” says Ted Beck, the en­dow­ment’s pres­i­dent and CEO.

As chil­dren hit their pre­teen years, NEFE’s guide also sug­gests that par­ents explain how bud­gets work, and the ba­sic in­vest­ing prin­ci­ples. The les­son could in­clude play­ing at be­ing an in­vestor by iden­ti­fy­ing a com­pany their child knows and en­cour­age them to track the stock’s gains or losses.

Fo­cus on sav­ings

En­cour­age kids to set aside money they get for do­ing chores or presents in their own sav­ings ac­count. This will help show them the im­por­tance of sav­ing up for a big pur­chase, and how bank sav- ings ac­counts work.

When a child is be­tween 5 and 10 years old, it’s an ideal time to take them to set them up with a sav­ings ac­count, which can help them learn the value of sav­ing and com­pound­ing in­ter­est, even at to­day’s low in­ter­est rates.

Many banks of­fer sav­ings ac­counts tai­lored for young chil­dren and teens. Ally Bank has an on­line sav­ings ac­count with min­i­mum bal­ance re­quire­ment and of­fers a 1.05 per­cent an­nual per­cent­age yield. Cap­i­tal One Fi­nan­cial of­fers a sav­ings ac­count for kids with no fees or min­i­mum bal­ance and of­fers a 0.75 per­cent an­nual per­cent­age yield.

Fi­nan­cial lit­er­acy is a key com­po­nent to un­der­stand­ing gen­eral money man­age­ment and credit ba­sics.” Heather Bat­ti­son, vice-pres­i­dent, Tran­sUnion

Share mis­steps

Par­ents should be open to dis­cussing their own fi­nan­cial mis­takes with their kids, as long as the con­cepts in the les- son would be some­thing their chil­dren are old enough to un­der­stand, Beck says.

“It’s OK to show you’ve made some mis­takes and what you learned, but do it as a dis­cus­sion, not a lec­ture,” he says.

Care­ful credit use

Par­ents with kids go­ing away to col­lege may want to add the stu­dent to their card to cover books or emer­gency ex­penses. A shared card ac­count also can help par­ents keep tabs on their kids’ spend­ing and pay­ment habits.

Par­ents should make sure their teen knows that credit cards are loans and that there is a cost to not pay­ing off bal­ances right away.


Teach­ing teens how to man­age their money early leads to healthy fi­nan­cial habits.


A tech­no­log­i­cal in­no­va­tion sub­ject by Shang­hai Jiao Tong Uni­ver­sity at­tracts vis­i­tors’ at­ten­tion at the 1st China Uni­ver­sity Sci­en­tific and Tech­no­log­i­cal Achieve­ments Fair held in Huizhou, Guang­dong prov­ince, in June.

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