Wednesday, December 2, 2009

Building Financial Skills

Does your teenage know the difference between a credit card, a charge card, and a debit card? Does he know what happens when a credit card bill is not paid on time? Can he figure out how much he will pay in interest charges for something that takes him six months to pay for in full?

Students in high school -- and beyond -- face numerous financial decisons every day and parents can't expect them to understand the issues involved in the money they spend and the expenses they incur unless they have had early and frequent exposure to what we like to call "financial education". Parents may not want to share details of the family exchequer with their offspring, but children should still be aware that bills come into the house and have to be paid regularly. Maybe they can put the stamps on the envelopes at first, and later do the math to make sure the utility bills are correctly calculated. They should see that parents write checks, or pay bills on line. They should have a bank account of their own, where they can deposit gifts and allowance, and which they can access with decreasing supervision as they get older.

We hear too many stories from parents whose children make poor financial decisons and who lack basic financial literacy, from writing a check, to managing basic financial software like Quicken, to understanding why and how they need to stick to a budget. Money is a complicated subject for adults, let alone kids. But by exposing young people to the nuts and bolts of budgets and bills at an early age, families can make it more likely that their children will understand the financial issues they encounter and become financially responsibile adults.

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