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Financial Responsibility

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Financial Responsibility

  1. 1. 8 LINKED NORMAN WEST OCTOBER 2014 I n one of the final episodes of ABC’s sitcom “Trophy Wife”, 8-year-old Bert gets a credit card in the mail and goes on a shopping spree. At one point in the storyline, Bert tells his father, “You hate your job; you should just get a credit card instead.” While it may be funny on the show, fortunately for Bert, sending an unsolicited, pre-approved credit card in the mail is now prohibited thanks to the Credit CARD Act signed in to law by President Obama in 2009. What this anecdote highlights, however, is the growing need for financial literary for children. Recent research from the University of Cambridge indicates that money habits, such as the ability to plan ahead and delay gratification, are formed as early as 7 years old. Children can recognize saving as a desirable behavior, but, according to research from the University of Kansas, are unable to develop their own savings capabilities until the age of 12 because of their stage of psychological development. What do these two studies mean for parents? Your children need your help starting at a young age to become financially responsible adults! Here’s what you can do: PRE-SCHOOL “When my children were young, I created a currency for each of my kids using inexpensive business cards I designed online. This allowed me to give an immediate “monetary” award to each of them when they earned it. Each of my children had their own currency design so that the currency of one child would not end up mysteriously in the collection of my other child.” -Amy Lee, Executive Director of the Oklahoma Council on Economic Education, parent of two Help your child delay gratification by saving treats for later. Open a pack of cookies or other snack, take out a serving size, and discuss saving the rest for later. Take your child to the store and bank with you. Teach your child that you need money to buy things and you get money by working. Assign your child age and stage appropriate chores, such as putting toys back in the toy bin, and provide a small allowance or commission for completing the chore. For younger kids, it is important to pay for chores immediately. ELEMENTARY SCHOOL “The more you save, the more money you have. It is important to put your money in a bank so that you won’t spend your money on the little things you think you need at the time like nail polish I saved my money for Sage, an American Girl doll. Sage means more to me because I bought her than she would have it she was given to me as a gift. I take good care of Sage because I worked hard to get her.” -Crystal Serrata, 4th Grade Student at Northwood Elementary in Piedmont Open a savings account in your child’s name and visit the bank to make deposits regularly. Bank accounts are safer than the sock drawer or a piggy bank. When your child wants to make a substantial withdrawal to purchase the new fad, remember it’s OK to say “NO.” It’s easier to save as an adult when as a child you get in the habit of putting at least a dime of every dollar they make (allowance, gifts, etc.) into their savings account. Practice the mantra: “Save Some, Spend Some, Share Some.” One practical and hands-on way is to get three Mason Jars labeled Save, Spend, and Share and have your child divide each dollar between the three (with at least 10 percent to each the save and share jars). Read with your child and point out the financial and economic themes of children’s literature. You would be surprised how often money themes (getting a job, working, getting paid and buying things) come up in the books your child reads. This is a great time to discuss the benefits of saving, how your child can make money around the house, and how to save to buy things. Children should do some chores around the house for free just for being a part of the family (making their own bed, cleaning their own bathroom, cleaning their own dishes, etc.). Allow your child to earn money around the house by doing extra chores in addition to their own (making your bed, cleaning your bathroom, doing all of the dishes, etc.). Do not give advances and do not pay your child for paid chores until the unpaid chores are finished. It is important for kids to understand the connection between work and money at an early age. MIDDLE SCHOOL “Over the summer between eighth and ninth grade, I was able to clean some of the neighbors houses, help mow their lawn and Financial Re$ponsibility TEACHING YOUR CHILD HOW TO HANDLE MONEY FROM A YOUNG AGE DID YOU KNOW? $211 Billion: Spending power of 8-24 year olds (Harris Interactive) Fastest Age Group Filing for Bankruptcy: Those Under 25 (Lusardi, Mitchell, & Curto, 2010). US Student Loan Debt ($1.2 trillion) = GDP of Mexico ($1.17 trillion) (Credit Abuse Resistance Education, 2014) Average student loan debt: $33,424 (Federal Reserve of New York, 2014) Average credit card debt of indebted US households: $15,480 (Federal Reserve of New York, 2014) Average mortgage debt for US households: $156,474 (Federal Reserve of New York, 2014) Number young adults that possess basic financial literacy: 33% (Lusardi, Mitchell, & Curto, 2010).
  2. 2. LINKED NORMAN WEST 9WWW.LINKEDOK.COM other ‘around the house things’, that they needed help with. A lot of it was family friends or just friends in general. I earned a little over $300 dollars through my work and time. The earnings will help me participate in marching band. I learned that not everything is so easy, but sometimes it’s very much worth it if you put the time and effort, and responsibility towards what you are trying to achieve. In this instance I was trying to pay off my band fees.” -Michael Chowning, 9th Grade Student at Union Ninth Grade Center in Broken Arrow If your child has ever witnessed you swipe a card, sit down and point out that your bank statement shows money coming out of your bank account or have your child watch you as you write a check or pay your credit card. Just like Bert in “Trophy Wife”, children need to be taught that credit cards are not free money and that credit cards are an expensive way to buy things if you do not pay them off each month. Help your child learn to not make purchasing on credit cards that they could not pay for full in cash. In addition to the dangers of online predators, help your child understand the threat of identity theft. Sharing personal information online, like a birthday, social security number, or bank account, is risky because someone can steal it. Middle schoolers should know to not respond to emails that look like they are from banks, credit card, or cell phone companies asking for account information because they are likely fraudulent. Help your child recognize opportunities to earn extra money around the neighborhood. This could be a lawn business, babysitting, or reselling a bulk box of candy from Sam’s Club to friends. HIGH SCHOOL “Personal Financial Literacy is a class that I do not need to ask why I need to know this or why is this important. I use money every day and will continue to use money every day of my life. The class is helping me develop strong money management skills and will help me stay out of debt.” -Johan VonMarton, Senior, Putnam City West High School in Oklahoma City If your high school student’s school offers a course in personal finance, sign them up! Did you know that because of the Oklahoma Passport to Financial Literacy Act of 2007, Oklahoma students beginning with the class of 2014 are required to demonstrate proficiency in personal finance? If your child’s school does not offer personal finance, ask the principal what the school is doing to meet the Oklahoma Passport Standards. Many banks and credit unions offer schools guest speakers to discuss the topic of financial literacy with all grade levels. A part-time job builds work ethic. High school is a crucial time to continue the idea of Money=Work. There are a limited number of employers willing to hire 14 and 15 year olds with a work permit. The job market opens up for teens at 16, especially in movie theaters and some restaurants. Help your high schooler understand the importance of investing in their retirement early in adulthood. Ask a banker, credit union counselor, or insurance agent you trust to refer you to an investment professional. A mutual fund in a Roth IRA is an easy way to start turning saving into investing. Brent Rempe is a former middle and high school Personal Financial Literacy Instructor and currently serves as Director of Education for WEOKIE Credit Union.

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