After reading this latest study, I was simply speechless. I mean, nothing has changed since I graduated from undergrad in 2006, and from the looks of it, not enough is happening to ensure younger millennials and future generations learn anything about handling their finances.
It's scary to think how so much of our lives revolve around money, and yet forty-three percent of college students can't even tell you the difference between a debit card and a credit card. Like seriously, debit and credit cards are practically kindergarten lessons of personal finance, not advanced algebra.
These are the same students who are going to be our next government leaders, medical providers, charity co-chairs, etc, and they haven't learned anything about savings, credit, and budgeting at school or home. Today I am going to point out a few more glaring results from LendEdu's latest survey and some ways we can overcome these depressing statistics.
Here are a few results from 455 college students who were surveyed last month:
Fifty-eight percent indicated they are not saving anything.
Thirty percent indicated their parents taught them nothing about managing money.
Fifty-one percent received no financial education in high school.
Forty-three percent are not tracking their spending.
Am I the only one disturbed by these numbers? Academic success at the expense of financial literacy is not helping to "make America great again" (and I say that with all the sarcasm I can muster). To run corporations, CFO's need to know more than a little about finances, and nothing less should be expected of individuals expected to manage their day-to-day finances.
There are a few ways we can turn things around; however, we can't solely rely on anyone else to make the change. We (parents) must be willing to educate ourselves, even if we lack a complete understanding of money ourselves. When we learn, we can pass this knowledge to our children and give them an opportunity to put it into practice. Here is what we need to do:
If your finances are currently in disarray, be upfront about it.
The easiest way to teach your kids how not to manage their finances is by pretending like you have it all together when in fact you don't. If you're in debt and living beyond your means, it's time to eat the humble pie and admit you've gotten yourself into a financial bind. The key to being upfront is making sure you're going to put in the work to correct your situation.
Don't just tell your kids you're in debt or you've mismanaged your money, and then do nothing about it. Explain to them how some financial problems can be prevented and how others can be remedied. Tell them where you went wrong, what you are doing to fix it, and how they should be cognizant of the lessons you have learned as they develop their own money behaviors.
If your financial situation is solid (or you are doing extremely well), pass the knowledge forward.
This comes with one caveat. Parents, I'm not wealthy in a monetary sense, but when I do eventually get there, I don't plan on telling my kids I've arrived because quite frankly they don't need to know. It's not their money and if I have an inheritance for them, they don't need to be privy to this information until it's time for them to receive it.
What I will do is make sure they understand how I worked hard, saved, invested, and lived well within my means. By modeling and teaching the principles involved to achieve wealth, I'm equipping them with the tools to acquire it on their own. There's no need for them to expect any handouts from me or anyone else if I've done what I'm supposed to and taught them about money.
Start early and practice often.
As soon as your kids are old enough to ask you to buy something for them, they are old enough to understand the principle behind money. They have enough sense to know they don't have any money to get whatever it is they want, which is why they came to you. They have watched you pull out your wallet on numerous occasions as you've exchanged money for goods and services.
What they might not have realized up until this point is that your money doesn't magically appear in your wallet. You've had to work for your money. Once your child realizes a want, give them an opportunity to earn money on their own and save up for their purchase. By the time they become expensive teenagers, the practice of earning and saving will be second nature to them.
Have a year in review before you send them to college.
This step is important because this will probably be your last opportunity to make sure they have a good understanding of money before leaving home. A year before they go to college, make sure they know the basics of personal finance which include saving, budgeting, and living within their means.
You can do this by having them create a budget for their senior year expenses and other small expenses you've deemed appropriate for them to handle. They can use wages earned, allowance, or a combination of both. The key is to put them in charge of their budget and allow them to learn from any mistakes they might make while they are still under your supervision.
We can continue to wait for the government to require financial literacy be taught in all schools or we can be proactive and make sure our college students aren't graduating magna cum laude with no idea how to manage their money. I've said it often and it's worth stating again, we can encourage our kids to be scholars, gymnast, and football players, but all of that encouragement will be in vain if they are successful and still living at home with us because they don't understand personal finance.