April is Financial Literacy Month. When it comes to money sense, dollar smarts and financial literacy -- our children just aren't getting it, and we see the results every day.
From student loans, mortgages, credit cards and automobiles, the average American holds approximately $47,000 in debt. The national per capita income is just under $27,000 per year. We are in charge of our own financial health, but we are not taught the skills we need to manage it. We have a very low success rate of saving in the United States -- 3.7% of annual income. The average family savings account balance is $3,800, 25% of Americans have no savings at all. We are passing this legacy of spending on to our kids.
We need to see that our children are taught these skills so that they can grow up to be financially literate, and we need to start young. According to a survey by the American Institute of CPA's, parents give their kids an average allowance of $15 a week which adds up to $780 a year, with older children receiving more than younger ones. Parents say that their kids are spending their allowance as soon as they get it.
I believe in allowances for kids, but it is important to use the allowance in a way that teaches fiscal responsibility. Begin by explaining to your children that we save in order to get things we want in the future, but also to get things we will need in the future. It's difficult to think about the future when you're young because most children think of the future as next week, after dinner or five minutes from now. A 3-year-old is not going to understand the concept of long-term savings, neither is a 10-year-old, and it's obvious that adults don't understand either.
In Money Doesn't Grow on Trees, I explain that saving means putting something away in a safe place to be used, if necessary, at another time. I suggest having your kids make a list of things you can save besides money. Squirrels save nuts to eat during winter; most of us save empty bottles and cans for recycling.
We have to start when our kids begin to nag, "I want, I want." I teach parents to teach their children the natural consequences of money: The only way to get money is to earn it. When it comes to money, we are never alone. It is a connective tissue of society, and we are all connected to others through it. Money itself is not good or bad, it's a question of what you do with it. The same dollar can be used to buy drugs or go to charity, it's the user's choice. There are only for things you can do with money -- earn it, save it, spend it and share it.
Start your kids on my Work-For-Pay Allowance System as early as age 3. They do two types of chores: Citizen of the Household chores, where they don't get paid, and Work-For-Pay chores. Citizen of the Household chores teach them that good citizens of the world, the community and of the family, help out because it is the right thing to do. The Work-For-Pay Allowance System teaches them how to earn and budget their money. They will learn values and life skills that they'll need to live in the real world. These will become life-long habits.
From the basics of learning to count money to make change to skills of creating a budget, from balancing a checkbook to calculating interest and understanding how to buy and sell stock, our financial literacy grows with us.
Without basic financial understanding, our children face real challenges in adulthood. With too much credit card debt, they can be turned down by potential employers. Lack of planning can lead to a limiting education -- severely limiting lifetime income potential. The income gap between the college grad and the high school dropout is huge. High school dropouts earn 80% of what college graduates earn.
In 1989, I formed The Children's Financial Network, Inc. I have written 26 books -- including a New York Times #1 Best Seller -- empowering children and their families to take charge of their financial lives. Most recently, I have released two mobile video gaming apps for 5- to 10-year-olds that teach finance in a new and different way. The topic of financial literacy is real -- it is a movement -- but our job is not finished. Currently, only 22 states require high school students take a course in economics and only 13 states require schools to offer a course in personal finance.
Join the movement. Get in the spirit of Financial Literacy Month and begin to teach your kids about money today so they can have a richer tomorrow. Remember that kids learn from example -- use the real world as your financial classroom.
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