My wife and I were band volunteers during my daughter’s high school years. One summer, my wife worked at the payments table when a student approached her about paying for his items, but he didn’t know how to write a check. He never learned how to use a checkbook, and he was a senior!
Financial literacy is a concern since most kids are taught little about banking or finance. According to one study, college students carry an average loan balance of $37,000, and the Federal Reserve Bank of New York reports that the collective debt level is $1.6 trillion. If students (and parents) had a basic understanding of finance, the student loan crisis would not be a crisis. The student-loan debacle is a result of poor financial literacy, and we’re all paying for it.
If you have children or grandchildren in elementary, junior high, or high school, here a few things you can do today to give them a boost, and the sooner you start, the better. As Yosemite Sam would say, “Time’s a wastin!”
- Open a checking and savings account so they can experience the banking system up close. Help them transfer 10% of all deposits from their checking account to their savings account. For example, if they deposit $100 to their checking account, transfer $10 to savings. Teach them how to use their bank’s online portal.
- Give them access to their debit card and encourage them to use it while shopping. When you dine at a restaurant, make them pay the bill with their debit card. Show them how to use the ATM.
- When they’re old enough, open a credit card in their name so they can start to build their credit history. If you’re concerned about excessive spending, put a spending limit on the card. I recommend linking the credit card to their checking account for automatic payments, so they don’t incur any late fees.
- Buy a few shares of stock in several companies. Let them pick the companies, so they have an interest in following their progress. A great way to learn about financial markets and the economy is to own individual stocks because they will have skin in the game. They’ll also learn a lot by reading annual reports from Berkshire Hathaway, Apple, JP Morgan, and Tesla.
- Encourage them to donate 10% of their income or savings to charities. Help them help others through giving. A giving mindset is emotionally and financially rewarding.
Please don’t wait until your kids get their first job after graduating from college before learning the basics about money; educate them today on banking and finance. Then, your children will make wise financial choices, and they won’t live in your basement until they’re forty.
The lack of money is the root of all evil. ~ Mark Twain
May 10, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.
 https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007, Daniel Kurt, March 16,2021