Train up a child in the way he should go: and when he is old, he will not depart from it.
Growing up in an entrepreneurial environment, I was fortunate to learn about money and finance. Math was one of my best subjects in school and I endeavored to become a certified public accountant. I remember the days when my dad sent me to the bank to obtain coinage for the family’s retail store operation. For me it was a profound moment in my life because my father had instilled in me a great level of experience, trust, and responsibility. Despite growing up in a business environment, I was never introduced to credit unions until after college. The Church where we worshipped and attended Sunday School had a credit union, but I was unaware of its existence until well in my late twenties. As I reflect on my childhood, I wonder if credit union professionals and volunteers were doing the best job at creating credit union awareness or could they have done better”? How many others graduated from high school without knowing the difference between a credit union and a bank? Teaching young people in schools at an early age is a great way to introduce credit unions and the credit union difference. Young people should also learn about personal finance and credit unions can take the lead in making sure that happens.
In a report entitled, Translating Financial Education into Behavior Change for LowIncome Populations, the research authors claimed, “those who are taught about personal finances at a younger age tend to do better financially than those who were not.” The study strongly supports the notion that financial literacy training should be part of an early childhood education. Parents however should not wait for someone else to teach their children about finance. Be proactive and take your son or daughter to the local credit union in your neighborhood. If you are financially able, open a savings account in their name. Typically youth accounts do not incur minimum balance service charges so it is a great way to promote savings. Instruct your child how to count money, how to save it in a piggy bank, and then have your son or daughter personally deposit it at the credit union. Have her interact with the member representatives and tellers; also take the time to explain to her what is on the deposit receipt. Finally, when the credit union statement arrives in the mail review it together. The savings dividend is a great entry point to discuss interest rates and A.P.R.s.
Make it your business to train your child at an early. But more importantly, make sure they are proficient in math. It’s great to teach children the concepts of money or finance (e.g., interest rates, assets, liabilities, and mortgages to name a few), but the underlying basis of each financial term is mathematics. Generally speaking, “the focus should be on math first, not money” stated Harvard Business School’s professor of finance Shawn Cole in a February 2015 Wall Street Journal article. He said, “A lot of decisions in finance are just easier if you’re more comfortable with numbers and making numeric comparisons.” In the study conducted by Professor Cole, he concluded that students who came from states that required additional math courses, simply did a better job at managing their credit.
Finally, many studies have shown the connection between financial education and sound personal finance practices. There is no doubt financial literacy training has its place. Overall, adults are not doing well managing their personal finances. The 2015 Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling published the following key findings: 1) only 40% of U.S. adults claimed to use a budget to closely track spending and 60% did not, 2) only 30% of adults use household income to save for retirement, 3) a third of adults stated that their credit card debt is rolled over month to month, 4) 75% of adults agree they would benefit from advice and answers to everyday financial questions from a professional and 25% strongly agree about the same, and 5) 52% of adults admitted to not knowing their credit score and 66% percent did not obtain their credit report within the last year.
Give children the financial head start they need. Train them up in the way they should go and when they are older they will not depart from it.