HOW MONEY-SAVVY IS YOUR TEEN?

WHY WE NEED TO GET SERIOUS ABOUT TEACHING KIDS TO BE FINANCIALLY LITERATE

Posted by: Team Tony

Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

Meet Megan. Megan just graduated from college and has about $35,000 in student loans and $5,000 in credit card debt. Fortunately, Megan was able to secure a job, which pays $45,000 annually — the average across the country for recent college grads — which means that every month, she will take home roughly $2,700.

Like most recent grads in her position, Megan doesn’t set a budget for herself. She’s not thinking about saving for the future or putting money into an emergency fund. After all, retirement is 43 years away and as it is right now, she can barely afford rent. And rather than making a concerted effort to pay down her credit card debt, she pays the minimum balance due. In fact, some months, she misses the payment altogether, because she’s not completely aware of how important her credit score is.

Fast forward 15 years. Megan is still making many of the same financial mistakes. But now, her credit card debt has increased substantially, the interest on that debt has skyrocketed, and she is still paying off her student loan debt. And because of missed payments and increased debt, her credit score has plummeted. On the plus side, she has started thinking about retirement, but she still only has less than $25,000 put away.

Does Megan’s story sound familiar? It may, because it’s the story of tens of millions of Americans today.

The alarming truth is that, in total, American consumers owe $918.5 billion in credit card debt and $1.19 trillion in student loans. As for retirement, most Americans are grossly unprepared, with 57% reporting to have less than $25,000 put away in savings or investments for the future. And money continues to be the leading cause of stress for Americans and the most common cause of conflict in a marriage, with a whopping 76% of people saying that they feel out of control when it comes to their finances.

How did we get here? If money is such a critical factor in the quality of our lives, why were we never taught the importance of personal finance?

What if we were able to go back to Megan and give her better guidance on her personal finances? What if she were required to learn the basics of paying bills, building good credit, budgeting her income and paying off debt in high school? Would this make a difference in her financial future and ultimately, her quality of life?

Perhaps.

A recent study conducted by the Center for Financial Literacy at Champlain College in Burlington, Vermont, graded states on their efforts to improve financial literacy in high schools. Only five states across the country scored an A. These states — Alabama, Missouri, Tennessee, Virginia and Utah — require students take a dedicated semester of personal finance courses. Utah, the only state to receive an A+, mandates students learn about savings, investments, credit and online banking. Students there are also required to take and end-of-course financial literacy assessment administered by the state. And teachers of the personal finance course receive special training on topics like financial training, credit and investing.

On the other end of the spectrum, nearly a quarter of the states — including California, Massachusetts and Pennsylvania — received a failing grade. These states have, according to the report, virtually no requirements for teaching financial literacy at the high school level.

In lieu of high school courses, a number of students have to rely on their parents for financial guidance, which can be particularly problematic. For one, parents may be uncomfortable talking about money. In a 2014 survey from T. Rowe Price, parents were more inclined to talk to their children about alcohol and drugs than finances. Many adults may also lack the necessary financial knowledge to give sound advice. According to a recent survey from GoBankingRates.com, more than 60% of adults do not have a financial cushion for emergencies.

“When you look at the adult behavior, you can’t help but wonder whether or not these adults are doing a good job teaching their children,” said John Pelletier, director of the Center for Financial Literacy and author of the report.

This means students will ultimately have to learn financial lessons through trial-and-error, which can deal a hefty blow, especially considering that the majority of young people have no baseline to attach their expectations to. Pelletier has noted that he’s walked into a number of classrooms where the bulk of students believe their chosen career will make them at least $100,000 a year.

“You can see how people, based on that flawed analysis, think that they can afford $70,000, $80,000 or $90,000 in debt,” he said. “What needs to be taught is more career exploration, more understanding about income.”

This is particularly critical for the 71% of bachelor’s degree recipients who will graduate with a student loan. According to a recent survey from the Pew Charitable Trusts, nearly a third of white student loan borrowers and roughly a half of black and Hispanic student loan borrowers under the age of 50 said they would have found a different way to finance their education if they could make their borrowing decision again.

Of course, whether or not high schools should be responsible for teaching students personal finance skills is still up for debate. If financial literacy were mandated by the state, schools would have to train or hire new staff and implement new resources, which could put additional strain on already strapped budgets. But it is clear something must be done. Students need to understand that no matter what career path they pursue — whether they become a teacher, a physician, an artist or an engineer — they will need personal finance skills. And in an age of predatory lending, speculative investments and rampant consumerism, the earlier they can begin to become financially literate, the more prepared they will be to make the best financial decisions for their future.

Header image © TylerOlson/Shutterstock

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.

Source: https://www.tonyrobbins.com/wealth-lifestyle/financial-education-in-schools/

Financial Skills - Opening a Bank Account

I was surprised when I asked parents to tell me the life skills they wish their kids knew, and there was a resounding request for kids to learn how to open a bank account.

Similarly, there was a huge call out for:

• How to budget & balance accounts
• How to write checks and pay bills
• And how to start saving for retirement

It seems some of the things we take for granted are, as a result, missing from what we teach kids.

This article is the first article in the four-part series and will discuss the best and simplest way to get started with opening a bank account.

It seems easy, but there are several questions many people never think of that we'll address in this article:

1. Which bank?
2. Checking or savings account?
3. Are there fees or minimum balances?
4. Should I get a Debit Card too?
5. Should I have my name on the account with my kid?

1. Choosing a Bank

When you choose a bank, there are a few criteria you'll want to look at:

1. Location
2. Number of branches
3. Ease of access

The location should be convenient to your home, but also have enough branches so that - in the case of an emergency - you can get to your bank.

I opened an account with Elevations Credit Union when I was attending CU Boulder. It was convenient and credit unions are really great to bank with. However, after I graduated and moved, there were no branches around me, which made things very inconvenient. I ended up opening an account with US Bank since they are in about every King Soopers, where I do my grocery shopping.

This is especially important with kids because you don't want them to have to drive too far just to bank.

Similarly, ease of access into the branch is important. I remember having a Norwest (now Wells Fargo) account, and getting in and out of the bank's parking lot was terrible. I had several near-miss car accidents and dreaded even going to the bank.

2. Checking or Savings Account

As you'll learn in the future article about saving and budgeting, there should be an account that is used for saving and investing.

That means it's important to have BOTH a checking and savings account.

The reason a checking account is important, is so that kids can learn how to write checks, and have a designated spending account aside from a designated savings account.

Checking accounts are important for paying bills (be it online or via mail) and will give kids the opportunity to learn how to write checks. Even if check writing isn't as prevalent as it once was, it's still important.

I was shopping one day and realized I forgot my wallet, which had my credit cards and cash. I started to panic because I needed some food. Fortunately, I keep a couple of checks in the car and was able to save myself by writing a check... they still come in handy!

3. Fees & Minimum Balances

Some banks have fees to have an account and others don't. Obviously get the one that doesn't since your kid shouldn't have a huge account. Likewise make sure there isn't a minimum balance or a very small ($10 or less) minimum balance.

Just as important is how overdrafts are handled!

When I was in college, it never failed: my peers (who hadn't learned how to balance an account) would routinely trigger their overdraft protection and the hefty fees that went along with it.

They would look at their balance online and it would show $10. Then they'd check it again a few days later and it was at $30.

It was the magical growing bank account; and they never wondered where the extra money came from. Until the end of the month when they had over $200 in overdraft protection fees!

I would suggest NOT getting overdraft protection and instead making darn sure they can balance their account (which we'll cover in a future article).

4. What About a Debit Card?

Here's my thoughts on kids having debit cards: it makes it much, much harder to balance the bank account while making it much easier to overspend and run into trouble.

Are ATM machines convenient? Yes, but I have never once used one in my entire life. Part of teaching kids life skills is to teach them to be prepared. I keep an extra $10 in cash plus a few checks in my car. It wouldn't bother me if it got stolen.

If you're determined that your kid gets a debit card, wait at least six months after opening their account so they can learn "the old fashioned way" and understand how the debit card affects their account when they actually start using it.

5. Should I Be On The Account Too?

I think it's a very good idea for you to be on your kid's first account so you can monitor their spending and make sure they don't cause a train wreck.

It's good to get statements so that you can use that as a learning experience to go over them with your kid and teach them how to properly dispose of them (in a shredder) so that they decrease their risk of identity theft.

Come up with a time frame or benchmarks until you pull yourself off the account and let your kid take on the responsibility of an individual account.

Opening a bank account is a huge step into a new world for kids and it should be a great experience. Walk your kids through the setup and look for the learning opportunities along the way.

Arm your kids with financial skills and hacks...

Check out the article about getting financial aid for college!

How to Get Financial Aid

Article Source: https://EzineArticles.com/expert/Stu_Schaefer/2447706

Article Source: http://EzineArticles.com/9772248

The Cost of Christmas - Money Advice Service

Cute and a little bit of fun - what do your kids think the price of Christmas is? Have you asked? Share what they say in the comments below!