Parents give financial literacy a higher priority
A sign of the times: Parents believe money management is the most important life skill for kids to learn — edging out health, wellness and behavioral issues.
In the midst of the COVID-19 pandemic, 63% of parents who participated in a new Charles Schwab Financial Literacy survey rated financial education as the highest priority for their kids to master. That surpassed developing an awareness of the dangers of drugs and alcohol, 60.5%; healthy eating and exercise habits, 58.3%; and safe driving practices, 57%.
“Financial illiteracy is insidious,” said Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation. “The antidote is financial education, which gives people the skills they need to make smart money decisions that can help improve their lives.”
The pandemic, which has expanded into an economic crisis, has made one thing abundantly clear: Many people are woefully financially unprepared for an emergency. The survey of 2,000 adults, conducted in February and in June by the Harris Poll, shed light on how many people are living on the edge of financial hardships.
For example, half of those surveyed could not cover an emergency expense of $1,000 or less.
The Schwab survey also made clear that many respondents wish they had learned better money management skills when they were younger, and they want that for the next generation.
“They want to protect younger generations from the financial hardships they’ve experienced,” Schwab-Pomerantz said in an email response.
She also nailed one other point in the survey data, that financial literacy “can be the great equalizer to many of the social issues” we face. Good money management skill sets correspond to making smart decisions about money and feeling confident about the future, Schwab-Pomerantz said.
That said, the poll found that a large percentage of parents look to the schools to educate their children in financial matters. Parents also looked to the government and employers for financial programs.
But only 21 states currently require high school students to take a personal finance course to graduate.
Many teachers don’t incorporate money lessons into the existing curriculum for classes such as math and history, because they aren’t trained properly or lack the time to do so. And given the pressures and demands teachers are facing now, don’t expect that to change anytime soon.
Parents shouldn’t expect a free ride on this matter either. They need to look for opportunities to teach even very young children about money. It’s not a scary topic, nor is it rocket science. A kitchen table conversation about your child saving for an item he or she wants is a good starting point, especially if you can relate some examples from your own childhood.
This also means making sure that regardless of gender, kids and teens have an equal command on basic financial literacy tools like budgeting, as well as more advanced concepts like investing. In previous years, the Charles Schwab survey showed that young women had more of a focus on financial independence, but often lagged behind their male counterparts in saving and investing, among other discrepancies. Spend an equal amount of time talking to boys and girls about the same money topics, Schwab-Pomerantz said. “They need to learn the same lessons from the start.”
With teens and college-age kids, the focus should be on educating them before they go off on their own so they’re prepared to manage their own life, rather than you managing it for them.
What financial skills do your children need to develop before they leave home? Start with an understanding of wants vs. needs, delayed gratification, the pros and cons of credit, and how to develop a spending and savings plan. With older kids, stress the importance of socking some money away in an emergency fund to cover against a drop in income, an unexpected expense, an emergency or, well ... a pandemic.