Business of Giving: Teach Kids Economics 101
Next generation in desperate need of knowledge.
I talk to young people all the time, and I'm not just shocked by their lack of financial knowledge, I'm scared by it. Tweens think credit cards are free money. Teens applying to college sign up for loans without any knowledge of the payment terms or interest rates.
Education is the only tool we have to help the next generation make better decisions about personal finance than have many in our generation. We have to teach our children how to avoid the mistakes of taking on debt they can't pay off and of not saving wisely for the future.
Now I know that you Minyans are the financial gurus. I'm sure you're the ones who get the phone calls from panicked family members who don't know whether to sell their stock or hold onto it. But is there a chance that, while you willingly talk to adults about these topics, you haven't broached them with your own children? (I'm talking grown kids, too, for the record.)
If so, I think there are 2 simple ways you can improve our kids' financial literacy. First, speak to them about money. This should start when they're still young and continue as they mature.
For younger ones, show them the benefits of putting part of their allowance in a savings account. When they ask for the latest video game, tell them they can have it if they've saved up enough to buy it themselves. And speaking of video games, have them check out minyanland.com. This free, interactive website teaches your child about earning, spending, saving and investing money. You and your child can create your own characters and play against each other to see who can earn the most money and build the biggest nest egg.
For your adult children, guide them as they apply for student loans and mortgages. Teach them to read the fine print and to ask questions. Ask if they are contributing fully to their 401ks, and encourage them to learn as much as they can about the economy and personal finance. It's truly surprising to me how little people understand about the workings of our economy.
Our schools need to put greater emphasis on this topic. And as parents, we need to protect our kids when they're in their teens and early 20s from the allure of credit cards, risky student loans and spending without saving.
The subprime mortgage crisis that sent our economy into decline was caused in part by American's level of financial illiteracy. People entered into loans without understanding how an adjustable-rate mortgage works, or without first creating a personal budget that would help them figure out if they could actually afford the home of their dreams.
Unfortunately, many children today are innocent bystanders of their family's financial turmoil. Foreclosure is forcing them to leave the only homes they've ever known. They're standing with their parents in line at the food bank, praying that no one from school sees them there. They're listening to their parents argue about money.
At Children's Aid, we not only read about these situations, we experience them on a daily basis in our role as the administrator of The New York Times Subprime Neediest Cases Fund, which was set up to help these families.
Let's work harder to make sure that the next generation never has to worry about how they'll pay for food, shelter or retirement. You can start today.
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