Parents can take lead in ending financial illiteracy
Knight Ridder Newspapers
How bad is the financial illiteracy problem among kids? Consider these findings from the American Savings Education Council's 2001 Parents, Youth &; Money survey released last spring:
When asked to describe specifically what they have done to teach their children about finances, 56 percent of parents could name only one example; 31 percent could cite only two examples.
Eighty-one percent of parents who think they do a "fair" or "poor" job of managing their money still considered themselves effective in giving their kids financial advice.
When asked where they would advise their child to save $5,000, 58 percent of the parents surveyed did not identify long-term investments such as mutual funds or stocks that historically offer higher rates of return. Instead, many suggested that their kids put money into low-yielding bank certificates of deposit, savings bonds and savings accounts.
Almost daily, according to the survey, parents are missing opportunities to teach their children about personal finance, whether it's on a trip to the grocery store or simply withdrawing cash from an ATM.
Findings like these are why Don Blandin testified on Capitol Hill last week when the Senate Banking Committee held two days of hearings on financial literacy and education.
Blandin is the president of the American Savings Education Council. His Washington, D.C.-based organization represents a coalition of groups that promote financial education among kids and adults.
In an interview, Blandin urged parents to start teaching their kids about the difference between wants and needs as early as age 5. By middle school, he said, kids should know the basics about saving, investing, earning, spending and giving.
This early education might help reduce the number of young adults who are using and abusing credit cards. Many college students, for example, are graduating with large school loans and sizable credit-card debts.
"There's a very significant downside of ruining your credit when you're very young," Blandin said.
Blandin said teaching kids about money should be a "shared responsibility between parents and other caregivers," such as grandparents.
Is Blandin optimistic about stamping out financial illiteracy among kids?
"Kids are so smart," he said. "In the long term, they will realize at some point that being financially literate is just as important as learning to drive a car or burning a CD."