Instilling Financial Literacy Across Generations



Ron Roel

OVER THE LAST FEW MONTHS the economy has been recovering as the stock market—somewhat surprisingly—soared to record levels.But many families are still struggling to make ends meet and young people are having a tough time landing jobs.They’re worried that for the first time in generations, their future will not be better than their parents’.

Despite having survived a near fiscal collapse four years ago, our nation is still missing a sorely needed ingredient to secure the future of its citizens: broad-based financial literacy skills.Yes, we’ve made some progress over the last decade. April is now officially recognized by Congress as National Financial Literacy Month.The National Foundation for Credit Counseling (NFCC), founded roughly 60 years ago, has grown to 90 member agencies, offering financial counseling and education to more millions of consumers each year.

Another nonprofit, The Jump$tart Coalition for Personal Financial Literacy, works with 150 national partners, seeking to advance the financial literacy of pre-kindergarten through college-age students. A growing number of banks and credit unions also have launched fiscal literacy initiatives for consumers and students. And the federal government’s Consumer Financial Protection Bureau is now up and running, designed to help protect consumers from unscrupulous financial practices.

But we have a long way to go.

In the latest personal finance exam given by JumpStart a few years ago, high school seniors routinely scored less than 50 percent on a  31-question test. An online poll conducted by NFCC found that  64 percent of those surveyed did not have enough savings to satisfy a $1,000 unplanned expense. Meanwhile, a test of  adults 50 and older revealed that they didn’t do much better. Given three basic questions about savings, interest rates and investing risk, just one-third of those surveyed got all three questions right—not a good sign for future retirees.

During the last two years, I’ve been piloting a multigenerational financial literacy workshop with a colleague, financial planner Henry Montag, in some local schools, libraries and other public venues. The workshops are free—and yet, attendance has been frustratingly small. It’s hard to get people’s attention in the blur of competing activities peppering today’s hyper-busy families. But we’ve learned a few things about what we believe are important skills for both adults, and their kids who will soon be adults:

  •  Talk­ing about money and val­ues with your family. How do you cre­ate realistic finan­cial goals, under­stand­ing the dif­fer­ence between “wants” and “needs” at dif­fer­ent stages of life?
  • Living within your means. How do you man­age your money day-to-day, maintaining a budget,  pay­ing bills, bank­ing online and making adjust­ments as cir­cum­stances change?
  • Under­stand­ing the importance of good credit. How do you avoid hefty credit card, debit card, ATM fees, as well as other finan­cial pit­falls? And how do you build a credit history or rebuild poor credit?
  • Developing basic sav­ing and invest­ment strate­gies. How do you start saving when you’re young and keep saving through child-rearing and later years—even when you don’t think you can?

More important, we’ve discovered that in order to maximize financial literacy skills, families need to work together—youth, parents and grandparents—to avoid the kinds of mistakes that could lead to the next financial crisis. Each generation needs to be an integral part of this conversation. Teens are particularly vulnerable; when they go away to college for the first time they often need help learning how to pay their bills and live within a budget—before they get into bad financial habits that may carry into their adult years.

Actually, this is the perfect time—amid the heated rhetoric in Washington over spending and taxes, sequestration cuts and fiscal cliffs—for all of us to take more responsibility for our  future. I’m sure there are successful  financial literacy programs in other parts of the country, so let me know about them and we’ll circulate the best and brightest on this site. We need an approach that puts more “financial boots on the ground”—and involves multiple generations of each family.

For more information on this and related topics, visit the links on our Resources page.

Forty Forward!

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