April is National Financial Literacy Month. In the wake of the recent financial crisis, a greater emphasis has been placed on the need to educate consumers about personal finances so we can avoid the pitfalls that threw us into this unprecedented economic turmoil. Yet, credit card debt remains a national epidemic and personal savings rates are at an all-time low. According to the United States Commerce Department, personal savings are at a record low, just 3.7 percent. At the same time, we see that the average credit card debt per household is $15,956, according to calculations made from the Federal Reserve's February 2012 report on consumer credit. The key to building the next generation of fiscally responsible and financially healthy adults is educate and empower them before they get into this kind of trouble.
If children don't learn the principles of saving, spending and charitable giving at home, they don't learn it at all. Financial literacy is not taught in our schools and more importantly, parents need to impart their own personal financial values onto their children. Parents need to guide their children when it comes to how much they should save for a rainy day, when it's appropriate to reward yourself, and what's appropriate to give to charities and personal causes. These are questions I have struggled with for years in my dual role as an entrepreneur and a father.
Exacerbating this challenge is the fact that our children are growing up online, a place where real-world tangibles such as money, goods and services, even friends, are all virtual. As an Internet entrepreneur, I am a strong believer in the opportunities and advantages that the online world can provide for consumers. But we all have heard the stories -- or perhaps you have one of our own -- of a parent opening up a credit card bill to find hundreds of dollars in charges from iTunes or Amazon. Their child was playing with their iPhone and downloaded 30 apps and bought six books. Our children are growing up with a different playbook -- and set of rules -- than the one we were handed.
So how do we, as parents, start to instill good financial values in children? There are a few easy ways to start.
- Start early. One mistake I see many parents make is believing that children are too young to understand finances. Kids as young as 6 years old can begin to understand the concepts of spending, saving and giving to charity. In fact, when you start teaching children about money and finance early in life, it simply becomes second nature to them, as opposed to something that can cause stress or fear as they become teens and young adults.
- Engage your child. Children have short attention spans. Long lessons on money aren't going to be interesting, and they certainly won't be fun. My colleagues and I developed Tykoon to teach children about financial values through real-life experience. With Tykoon kids earn money through completing tasks and chores. The can save their money or use it to buy goods and also donate to real charities. The features and functions on Tykoon are parentally controlled. Also available as iPhone and iPad app, tools like Tykoon add a new layer of adult permissioning that allow kids to learn and explore in a safe and secure online environment that speaks to kids in their own language.
- Don't simply do what the neighbors do. Every family has its own approach to spending, saving and giving. Some families place a high value on donating to civic or religious organizations. For others, the ability to take a vacation for much-needed family time is a priority. Some parents feel their kids should earn money for doing chores, while others believe that helping around the house is the responsibility of everyone. What works for friends or extended family members, when it comes to money, will not necessarily work for you and yours. Teach your children what feels right and comfortable for you.
Responsibly using money is one of the most important things we learn in our lifetime, and yet it's a lesson too few of us take the time to teach our kids. It may even be something we haven't taken the time to learn ourselves. But it's never too late to start. Now, more than ever, we have access to wonderful resources that can help make these lessons easier to learn, and easy to teach others. We simply cannot let the next generation experience the pitfalls, dangers, and challenges that we've unfortunately had to go through due to a lack of education. We have the means; parents must now find the way.