Millennials experience life in a completely different way from my generation. They truly have the world in the palm of their hand - with access to anything they need right from their mobile phones. They process information in 140 characters. They deal in virtual worlds - growing up with social networking, social video gaming, and FaceTime as the norms for personal interaction.
This type of consumption has not only innately altered the way they take in information, but also how they live their daily lives. Ask yourself this - when is the last time your children paid for something with cash, or saw you pay for something with cash? And raise your hand if you have your checkbook on you right now.
Money has become as virtual as the rest of our lives. Spending isn't about counting out dollar bills, it is about swiping a card or tapping a button on your phone. With the rise of mobile payments and virtual wallets, paying a bill takes the same effort as liking a photo on Facebook - it can be done with a simple click of a button.
This can create a more casual relationship with money, and in some cases, a detachment from reality. That means that parents like myself have to work harder to ensure the next generation understands the realities of personal finance - and this means being smarter day-to-day. With a limited ability to digest rich amounts of knowledge, coupled with daily financial interactions that seem to have no more consequence than a game of Candy Crush, how do we teach our children about the true value of money?
Recognizing the need for a fresh approach to financial education, Bank of America has teamed up with Khan Academy to launch BetterMoneyHabits.com, a new way to help people develop better money habits that align with the way we learn, think and work today.
In today's new world, here are three takeaways to (quickly) teach your children - and yourself:
• Amp up your credit IQ -- With the fall of cash and the rise of credit technologies, it's critical that the next generation has a better understanding of how credit works - and what their credit score means. This video gives a short version of the five key elements that contribute to your score and how to check it on a regular basis. This one illustrates the difference between debit cards and credit cards - an important distinction that your kids need to understand in this world of plastic money.
• Understand your paycheck reality - As virtual reality becomes reality, it is common that deposits and payments are made without us ever actually touching money. Nowhere is this more true than your paycheck - where taxes, insurance and other items are deducted right off the top before it even gets to you. As your kids prepare for or start their own jobs, share this video on the anatomy of a paycheck which explains the deductions that will be made from their paychecks, and how much of that hard-earned salary they will actually bring home each month. And with the average American student graduating with $27,000 in student debt, your kids need to learn how to factor that into their monthly expenses.
• Don't get distracted from saving -- In today's world of short attention spans and immediate gratification, it is easy to forget to plan ahead. Why map out a route in advance when you can just pull up the GPS on your phone along the way? But when it comes to saving, making a plan and getting a head start makes a big difference. With the rising costs of education and healthcare, and unclear retirement benefits for the next generation, it will be important for them to build a nest egg for themselves. Whether it's investing or simply putting money into a savings account, making a plan early and sticking to it will make a big difference in the future. This video on the time value of money shows the math in action, in a friendly way.
Instilling a core of knowledge into the next generation in a way that resonates with them will provide them with a basis for good decisions. This way they'll think twice when they pull out their mobile phones -- the way we thought twice when we pulled out our wallets.
Video presented by Better Money Habits
The material provided on the video is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damages resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.