In its most basic form, financial literacy is the ability to understand how money works -- but it's definitely not that simple. In order to know how to earn, manage, invest, and save money as an adult, you must first learn the basics when you're young. And your education shouldn't stop there either. Adults should continue to self-educate on financial topics like investing, saving, and effective money management. This is necessary to make smart financial choices, and to help prepare children for their future.
The responsibility of educating children about finances often falls on the parents because financial education isn't offered in the majority of U.S. schools and that lack of education shows. Over the course of a little over three years, the National Financial Educator's Council administered a national financial literacy test to 4,916 youth between the ages of 15 and 18, from more than 40 states in the United States. The average score was 60.08 percent. In any standard "classroom" 60.08 percent would be a failing grade.
Consider this: If you failed out of medical school, would you be equipped to perform surgical procedures? No. So why are we sending our children out in to the world without the tools they need to make responsible financial decisions -- some of the most important decisions they will make in their lives? Financial literacy and education is vital to achieve independence and ultimate prosperity in the real world.
According to Brad Pagano, Co-Founder and Managing Director of the San Diego Financial Literacy Center, "Education is the key. Education that is clear, concise, and culturally competent, focusing on the prevention of debt, the accumulation of assets, and how financial decisions made today will, and do, affect you tomorrow and in the future."
So what's the best way for parents to engage their kids and give them the knowledge they need? There are a plethora of free tools, information and resources available that are easy to digest by people of all ages and from all walks of life. The best tools and resources not only provide education, but also motivate you to learn. With this in mind, I spoke to a number of financial experts and some everyday people to compile the top ten ways that parents and kids can start to improve financial literacy today. This list has something on it for everyone, from the socialite to the perpetual student.
1. Book Worms. If you are the type of person that gains valuable insight and knowledge from reading books, there are many that can help improve your financial literacy. An Amazon search for personal finance books or browsing your local library will reveal a lot of choices and might be a bit overwhelming. If you're not sure which book is best for your needs, here are a few suggestions we received from various financial experts for both you and your child.
· The Berenstain Bears' Trouble with Money
· Alexander, Who Used to Be Rich Last Sunday
· Bunny Money
· If You Made a Million
· The Monster Money Book
· Growing Money: A Complete Investing Guide for Kids
2. Comic Book Fanatic. If you or your child enjoys reading comics, there are a couple of great options that present financial knowledge in a comic book.
3. Gamers. If you prefer interactive fun or you're just looking for ways to get your kids excited about financial literacy, games are a great option in our technology-driven world. There are plenty of fun games available for adults and kids alike to help improve financial literacy.
· Minyanland (Children & Families)
· Mad Money (Elementary School)
· Consumer Savvy (Middle & High School)
· Gen i Revolution (Middle & High School)
· Show Me the Future (Middle, High School & Young Adults)
· Grab Todd's Cash (High School & Adults)
· Financial Football (High School and Adults)
· Financial Soccer (High School & Adults)
2. Competitors. If setting goals and participating in competitions motivates you, it's surprisingly easy to combine that with your finances. Check out these financial fitness challenges:
· The Mint (Appropriate for Children & Teens)
· Money Management International's 30 Step Challenge
3. Socialite. If you love to socialize, one of the most important tips for you is to surround yourself with people who are great money managers. Ask them questions about their best practices, such as how they keep a budget, what strategies work best for saving money, their investment strategy, and more.
4. Professional Student. If you're always looking for an excuse to head back to school, why not take a continuing education course on financial literacy or personal financial management? Tiffany Wright, Founder of The Resourceful CEOTM, says, "These courses are often held in the evenings and provide hands-on experience, such as actually walking through balancing checkbooks or reading credit card statements." You can even check out a list of free finance courses provided by top universities through the online educational platform Coursera.
5. Resourceful. If you're the type of person who researches every purchase, put those skills to the test and use online resources to self-educate. Here are a few suggestions to get you started on your search for learning everything about finances.
6. Born Rebel. For those that always need to learn things the hard way, it's best not to do so when it comes to personal finance. Try living vicariously through someone else by reading about others' personal finance journeys. Here are some top money blogs that provide personal stories and finance tips.
7. On the Run. If you're always on the go, make the most of your commute, your workout, or errands and tune in to podcasts to help improve your financial literacy. Here's a few to get you started:
8. Get Connected. Social media allows us to be more connected than ever, with people who have all sorts of valuable knowledge to share. Twitter in particular is a great platform for learning tips and tricks about personal finance. Just follow the experts.
With all of these free resources, tools, and information readily available, you and your family have a great opportunity to not only learn about smart financial choices, but to also start implementing them today. Choose the method that motivates you the most and get started. Remember, knowledge is power. Educating yourself will allow you to take control over your financial future!