Financial Education – School or Parent -Which is a Young Person’s Best Bet?

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Many American households struggle on a daily basis to make sound financial decisions. A large number of them fail and end up on the fringes of financial disaster. At this rate, future generations are very likely to face similar struggles meaning a lot of work has to be done if this gloomy forecast is to be averted. April, being National Financial Literacy Month, is a good time to assess if we are making any strides towards making sure that our young people will not need rescuing from poverty in their old age.

I believe that the level of financial literacy is necessary for today’s uncertain financial environment.  Learning the ABCs of personal finance, the benchmarks by which financial literacy is measured, can go a long way in helping the majority of millennials avoid financial missteps while making important financial decisions such as taking on student loans and making retirement plans.  While financial knowledge may not guarantee success in life, ignorance about money management, budgeting, and other financial concepts often carries a high price.

Financial skills are undoubtedly critical life skills. They should be taught from an early age and honed throughout one’s life.  The concern, however, is, who should be responsible for giving our young ones the much-needed financial education? Should high schools and colleges provide mandatory personal courses or should it be the responsibility of parents to educate their children on financial matters?

financial education

Students Loans and Personal Finance courses in School

The default rate on student loans in the country is staggering. This is a good example of what happens when young people with little to no financial knowledge make high-impact financial decisions. Most college students take on student loans without having a payment plan. They only become aware of their inability to pay when they are neck deep in interests and penalties. It makes little sense that the education that these loans are supposed to pay for does not include a course on how to manage such debt.

Getting a student loan is just one of the important financial decisions your children will have to make in their lives. Others include saving for retirement, making investments, taking mortgages, buying property and managing family finances all which become increasingly impossible when they are saddled with student debt and other bad debts throughout their life.

Teaching young people to manage money early enough can help them avoid such pitfalls. I’m positive that if educators impacted their students with proper financial education, all the way from elementary school to high school, they would be able to make sound financial decisions starting with a choice of college funding.

It is of concern however, that financial courses in school do not necessarily enable students to make the sound financial decisions that society currently demands. This is because they basically teach about the various financial products but fail to give students the context to evaluate them. For example, learning about various insurance products does not help a student determine which the most suitable choice is. This requires practice in the real world.

Since there are no “practice loans” young people can only learn from other people’s experiences and this is where parental education comes in.

Financial Education from Parents

It is hard for most parents to have conversations about money with their children. This is mainly because they have their own issues with finances and feel that their financial literacy is wanting. What good would their financial knowledge do for their kids if they too lack confidence in their ability to make good financial decisions?

A large number of American families, especially young ones, struggle to pay bills. Most find it a challenge to cope with a household budget squeeze. According to a Federal Reserve Survey of Consumer Finances, adults today are in more debt than they were in 10 years ago during the recession. The average retirement savings among American households in 2016 was only $95,000, a skewed figure considering that 14% of these families hold most of the savings. This is mainly attributed to limited financial education in these households.

Children raised in such households have little chance of achieving financial freedom unless their parents set them on the path mainly by example. Financial education should be an exercise for the entire family. There is a lot of educational material, which you can use to educate yourself on financial management and gain tips on how you can make it easy and fun for your children to learn the same.

As parents, you are responsible for family finance decisions. Experts suggest that the most effective financial education for children is to involve them in making financial decisions for the family. Involve them when making the budget for the household, shopping and even planning family vacations. As they grow, you can move on to advanced topics such as credit, borrowing, and insurance. Strive to demonstrate good examples for your kids since such practical lessons will stay with them longer than classroom courses.

What do you think are the best ways to engage kids and teens on the topic of money?

10 thoughts on “Financial Education – School or Parent -Which is a Young Person’s Best Bet?”

  1. Great article Brian. Personal financial guidance for children is such an important topic that doesn’t get nearly enough coverage. Personally, I was very lucky to have parents who actively educated me about money, savings and compound interest. But I can’t believe the school systems don’t do a better job of this. Financial best practice is so important to living a happy and fulfilling life of freedom, I believe all parents have a responsibility to educate themselves and their children about basic personal accounting. Thanks again!

    • Great to hear your parents taught you well Jay. I agree such an important topic that our children need to know and learn. I wonder what happens in those families where parents don’t have a handle on their own money, how can they possible teach it to their children.

  2. My partner and I talk openly about our finances with and in front of his son. We like him to know that even when it looks like we’re splurging, it’s because we’ve chosen to spend our money on whatever the splurge is instead of any number of other things.

    Even though I never had personal finance in school, I was lucky to grow up with a mom who taught me the value of money and importance of saving. I do think think schools and colleges should teach it more, but just like everything schools teach it’s also up to the parents to reinforce.

    • Open communications is a great way to involved children. They learn a great bit from your examples as parents. It also reinforces that money is an okay topic to talk about. Nicely done Jax!

  3. I think there needs to be a combination of school/parent education. What if a child’s parents don’t educate them about money at home? The school then fills that void so the child at least gets some kind of financial education.

    • I agree. I hear to many stories of adults/parents struggling with their finances.We were in that boat until we got our act together.

  4. Parents are definitely the best way to go – but not everyone has very good parents, unfortunately. Or they may have wonderful parents who suck at money.

    I do think it’s weird that colleges require this basic core of classes and one of them isn’t personal finance related. There’s so much basic math in it, you’d think it could count towards a math requirement – especially for people (like me) who plan to do everything they can in life to avoid math. Forcing me to take a class like Calculus was pointless, forcing me to take a class on how compound interest works would’ve been way more useful.

    • Or even in high school, before they make the big purchase college decision. How great would it be for teenagers to be thinking about ROI on their degree, instead of how cool the campus is.

  5. Schools will never be the answer on this subject simply because they are too generic so they do not offend anyone’s personal situation. Even so called experts often talk in vague terms that do little to help those without a financial background.
    I also agree that parents have very different skills and many cannot teach what they do not know themselves.
    I was always open with my kids about bills/ money coming in etc. all of my kids are doing good in handling their basic financial situations. However from witnessing my daughter and son in law, I found out that my kids in law had ZERO money skills and it has been an effort for my kids to teach their partners to deal with finances.

  6. Great topic, Brian! To be honest, I learned from my parents both what I didn’t want to do in overall money management, and some great tricks for being frugal. My school had a required money management (personal finance) class that I learned some bigger-picture money concepts. The things that stuck with me were practical tips which ultimately I didn’t end up agreeing with, though it wasn’t bad advice. Now that I have kids, I believe the burden lies with us as parents. There are so many different financial philosophies out there, and while I want our kids to make independent choices as adults, I don’t want our uber materialistic culture forming their financial perspectives. So we have already started with them at ages 3 and 5.

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