Financial Literacy among young Americans has been a focus of the Jump$tart Coalition since its inception in 1995. The coalition consists of 49 affiliate state organizations. Jump$tart’s mission is improving the financial smarts of students. Each state can choose their own method of accomplishing the mission; some require high-school students to take a personal finance class before graduation, some incorporate fundamentals into existing course work and others make personal finance education available as an elective. With all the great work you’d think that students would fare better than the most recent Coalition’s 2008 survey. The results show that financial literacy of high school students has fallen to its lowest levels ever with a score of just 48.3 percent (http://bit.ly/cB8qGb). On the brighter side, college graduate scores are improving, averaging 64.8 but a majority of students do not graduate and are therefore not counted in this average. You may be asking yourself, so what’s the problem?
A recent study issued in March 2013 by T. Rowe Price (http://trowe.com/YIFQHN) concludes that a majority of parents surveyed are “short-term” focused, failing to prepare for long-term financial stability. Specifically the survey found that 50% of parents do not save regularly for retirement, 42% do not maintain an emergency fund for unexpected expenses, 45% do not have life insurance and 74% do not have an updated will. Moreover, while 73% of parents report having regular conversations about money; 62% limit their discussions to short-term financial topics like shopping for school clothes. 14% of parents discourage kids from talking about money at all.
The survey also found that while parents and kids agree that a college education is the number one key to a strong financial future only 59% of parents have discussed how to pay for college with their kids and only 41% of parents regularly save for college education; in fact more parents save for the annual family vacation (46%) than for college.
So how do kids prioritize their spending? Only 25% of kids surveyed save for long-term goals and 63% save for short-term goals with a quarter of the short-term “savers” spending their money immediately on unplanned items.
When parents were asked about their biggest money regrets the number one answer was taking on too much debt(19%). Living within your means was the number one best advice parents offered, weighing-in at 39%, yet 44% of parents surveyed admitted to carrying a balance on their credit card for at least one to two months a year, some reported always carrying a balance.
Still wondering why young Americans are struggling with financial literacy? It is fairly well documented that Kids learn concepts in a variety of ways but according to a recent article written by Pediatrician Dr. Roy Benaroch, MD (http://bit.ly/196eL5T) “Kids learn far more from watching and imitating than from listening to lectures.” Based on the results of studies reviewed above, our youth does seem to be following parents’ lead when it comes to financial literacy. So what can parents do to help ensure a more secure financial picture for our youth? We can continue to have frequent discussions about money but incorporate both long and short term financial planning and most importantly we can model these practices in our own lives.
Wondering how to start? We are here to help, call our office at 877-257-0057 if you need help putting a long-term plan in place, look for next week’s blog entitled Teaching Your Kids about Money.
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