I recently ran across an article on Bankrate that talked about raising a money-savvy teen. In it, they covered ten money management lessons. They also provided some depressing statistics on the state of personal finance education in the United States.
For example, when asked about basic financial concepts, high school seniors were only able to correctly answer 48% of the questions that they were asked, and college students didn’t fare much better. In fact, college seniors correctly answered just 65% of the questions that they were asked.
So, what does Bankrate think that teens need to know? Here’s their list:
- Balance a checkbook
- Budget money
- Finance college
- Establish credit
- Identify wants vs. needs
- Deal with debt
- Pay taxes
- Consider all costs
- Save for the future
- Stretch a dollar
I was surprised to see that there really wasn’t anything on this list about managing credit cards. I guess that some of this stuff could technically fall under establishing credit and dealing with debt. However, I think there’s a big gap between securing credit and dealing with debt — namely, managing your available credit wisely.
I also think that it would be valuable to teach kids about the loan process in general. While they talked a bit about student loans, kids leaving high school should (in my opinion) have at least a cursory knowledge of how things like car loans and even home mortgages work.
Finally, I find it hard to believe that they didn’t include anything about investing on this list. It’s really never too early to start educating kids about investing basics, and teens are certainly old enough for a basic education on investing and financial markets — e.g., stocks vs. bonds, the power of compounding, etc.
Of course, regardless of what’s on this list, it’s clear pretty clear from the statistics presented above that they’re not getting this info at school. Thus, it’s extra important to ensure that they get this stuff at home.