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Financial Literacy: Adding up the benefits of starting young
It’s never too late to start your financial education, but the earlier, the better. From counting coins in Kindergarten to planning for your retirement years, managing your finances is a critical part of your financial security– regardless of how much money you have.
Financial literacy now
A 2015 National Capability Study published by the Financial Industry Regulatory Authority (FINRA), reported that two-thirds of Americans could not pass a financial literacy quiz that included basic questions about financial risk.
It also concluded that when age-appropriate personal finance topics, like budgeting, interest rates, and debt are incorporated into a school’s curriculum, it positively impacts the decisions, saving, and spending habits in adulthood.
Benefits of financial literacy
Basic financial literacy helps people become self-sufficient and achieve financial stability. This includes being able to save money, distinguish the difference between wants and needs, manage a budget, pay their bills, buy a home, pay for college, and plan for retirement. Literacy helps them create a realistic roadmap that will take them through their daily lives making good financial decisions.
Financial literacy also empowers people. With any lack of financial education, anything that resembles credit, interest rates, or investments is intimidating and leaves individuals at a disadvantage. We’re not saying you need to be a financial guru, but knowing how interest rates work, the difference between stocks and bonds, and the factors that impact your credit rating, for example, motivate consumers to ask questions and seek out their best options. It also decreases their stress level. When people are well versed in the state of their finances, they have the information they need to take action, modify their investment portfolio, or continue with their current strategy.
Understanding your finances helps reduce the risk of becoming a victim of fraud. Some tactics are easy to believe, especially when they’re coming from someone who seems to be knowledgeable and well intended. A basic level of financial education will help people recognize the red flags and, at the very least, talk with a trusted advisor before making any commitment.
Why it pays to start early
With any educational plan, you’re continually building on the information you’ve learned in the past. It’s the same with your personal finances. You need to know how money works before you spend it, and that takes time and practiced application. Too many of us have learned the value of a dollar a little too late in life or what it means to be drowning in a sea of debt.
Early education allows individuals to develop a healthy relationship with money. They learn the importance of earning, saving, and managing their debt, which leads to becoming a financially responsible adult. They’ll have the knowledge it takes to wisely decide how they’ll pay for college, a car, or even a mortgage and know the consequences of debt accumulation, budget-busting purchases, and high-interest predatory lenders. You shouldn’t have to experience a financial misstep to benefit from it. Start teaching financial responsibility when kids can still be kids and when they’re grown-ups, they’ll know no other way.
Graduation gifts that won’t empty your savings account
With your mailbox overflowing with announcements and party invitations, there’s no denying that graduation season has arrived. Whether it’s high school or college, you’ll want to choose a gift that’s both thoughtful and appropriate for your graduate, but also doesn’t break the bank. Here are a few ideas to offer your congratulations:
A share of stock
A share of stock is a gift that can appreciate over time. To make it a little more personal, you may want to put some extra thought into the company you choose. Do you have some great memories of visiting Disney World together? Buy a share of Walt Disney Company. Mac lover? How about a share of Apple, Inc.? Car enthusiast? A combination of the Big Three, General Motors, Ford, and Chrysler would be a fun choice.
A financial planning consult
Planning, budgeting, and having to stretch your last $20 over the next week is always a challenge. Whether they’re college-bound or heading off into the working world, graduates likely have little experience effectively managing their finances. This is the time when they’re most susceptible to making some huge financial mistakes. Why not put an expert in their corner—other than Mom and Dad—who can offer some professional guidance and warn them of the consequences of poor financial management? It may not be the most exciting gift, but it will be one of the most valuable.
An annual subscription
Is your graduating senior an avid reader? An annual subscription to a specific area of study, personal finance or money magazine could be an excellent idea, especially if it’s digital! How about the WSJ or your hometown newspaper? Not only will they think of you each month when it arrives, they might learn something, find another interest, or just be able to ward off a small bout of homesickness.
A gift card
Gift cards are a great way to go if you don’t want to commit to a specific item. Does your graduate need something practical? Choose a Walmart or Target gift card. Are they headed to work? Maybe they need some new interview attire. Want to make sure they eat more than just pizza and french fries seven days a week? Their favorite restaurant gift card would be perfect. The choices are endless!
Money for groceries, books, gas, school supplies, clothes…cash will never go unused and is always appreciated regardless of the amount. It may not seem as personal, but let’s face it, these graduates are entering a new chapter of their lives, and they’re not sure what to expect or how much it will cost. On the bright side, not having to use a credit card will allow them to manage their debt more effectively and will reduce their chance of accumulating astronomical interest charges!
Whether you decide to give a practical gift, something smart, fun or completely off the wall, we’re sure your graduate will absolutely love it. They’ve worked hard to achieve their success and will appreciate just being celebrated. On to a new adventure, they’re going to need all they help and guidance they can get, and your encouragement and support will mean the world to them!
2017 What’s Ne[x]t Scholarship
What will you do next?
The 2017 What’s Ne[x]t Scholarship is back and we’re excited to once again be giving away $15,000 in scholarships to THREE deserving students. Want to enter? Create a short video (5 minutes or less) telling us where life’s taking you, what your passion is, and what you want to accomplish, and you could win.
Applicants must be a Georgia’s Own member, age 25 or younger, and attending an accredited institution for the 2017-2018 school year. To find complete guidelines or to apply, please visit blog.georgiasown.org/scholarship .
Start filming – applications are due by April 30, 2017!
When should I open a checking account for my child?
Many parents establish a savings account for their child early in life in order to save birthday money or a part-time job paycheck. But what about a checking account? When is the best time to add one to my child’s list of responsibilities? Most would say the best time to add a checking account is early in the teen years, but the real answer, however, is when your child has demonstrated an acceptable level of maturity concerning the money they have been entrusted with thus far.
What do I need?
A teen checking account can help guide your child in the right direction before poor spending habits become the norm. Since you, as a parent, will likely have to co-sign for your child’s checking account, this can be an account that the two of you can handle together. You’ll both have access to the account information, including the ability to monitor transactions. This will allow you to review check payments, withdrawals and other activity before it’s gone too far off track.
To open an account you will need:
- Your child’s Social Security number and date of birth.
- A picture identification, i.e. your driver’s license.
- Personal details such as your address, email address, and date of birth.
- Your initial deposit, including cash or checks.
What about a debit card?
A debit card is an additional responsibility that comes with a checking account. Any time your child uses their debit card, a given amount will be deducted from the funds in their checking account. It’s critical to explain the risk of overdraft and the consequences that accompany it. They should also be aware of the risks they open themselves to should they lose their card or have it stolen. They should immediately report the loss of their card to the issuing bank and never write down on paper or verbally share their PIN with anyone.
As a parent, you want your child to be able to handle their finances in the most effective way possible. A saving account is an excellent head start, and a checking account is a wise follow-up. It’s never too early to get started on their financial education, and these products are the stepping stones that will serve as the foundation for their success.
7 Money-Saving Tips for Teens
Most teenagers probably won’t leap at the prospect of learning about personal finance on their own. That’s why it’s important to take the time to teach them smart money management. To get the conversation started, here are seven topics worth discussing to help your teen avoid costly financial missteps in the future.
Encourage your teen to get a job
Preaching about the value of a hard-earned dollar isn’t quite as effective as encouraging your child to get a job. By working for their money, teenagers are likely to begin thinking critically about how they spend it, which is a good habit to pick up at an early age. If your child is too young for a job, you could provide a weekly allowance for helping around the house.
Help your teen set a budget
Once your teen starts earning money, explain how to set a budget. Consider explaining the difference between essential and nonessential expenses, providing examples from your own life.
Set financial goals together
Since creating a budget isn’t the most exciting activity, introducing the idea of saving up for a fun purchase might reinvigorate your teen. Putting away money every month requires discipline and is a great skill to practice at an early age by regularly stashing away some cash for a new smartphone, for example. Crunch the numbers with your child to determine how much needs to be saved each month to hit the savings goal by a certain date.
Help your teen sign up for a checking and savings account
So money doesn’t have to be stashed under their mattress, sign your teenager up for a checking and savings account. Although you’ll need to co-own the account if your child is under 18, your teen can have an active role in managing it. Just know that you’ll have to foot the bill if any fees, such as overdrafts, are incurred.
Encourage responsible credit card use
Although your child won’t be able to get a credit card before turning 21, anyone can be set up as an authorized user on your plastic at any age. Make sure to implement rules regarding when your teen can use the card, and make it abundantly clear that your credit score will take a hit if your card is maxed out.
Take your teen shopping
It can be tempting to overspend on name-brand products. To help your teen fight those initial instincts, shop together and explore the wonders of coupons, sales and store brand items. This should underscore the notion that popular products don’t always have to be the go-to option, which can save your child a lot of money over the years.
Teach your teen about compound interest
When it comes to saving money, compound interest is a person’s best friend. Teaching your child about the many benefits of compound interest should encourage contribution to a 401(k) plan in a future full-time job.
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