By Diana Palmieri
Did you know that young adults are among the fastest growing groups filing for bankruptcy? They are overwhelmed with credit card debt, student loans, and buying things they don’t need. Is your child prepared for his or her financial future?
Charles Schwab conducted a survey a few years ago about Teens and Money. Eighty-eight percent of teens looked forward to their financial independence (didn’t we all?) and predicted they will be free of any parental support by the age of 25 and then expected to earn six-figure salaries. Although I can appreciate the optimism, further stats show that only 34 percent knew how to pay bills, 26 percent understood how credit cards work, and fewer knew about paying taxes or what a 401k plan was. So while they want to achieve financial success, they don’t really have a concept of how to reach such goals.
The good news is they want to learn more and be involved in their personal finances. So it starts with you! Take a step, and start with establishing an allowance.
One of the most exciting things I remember as a young girl was allowance day. I had a piggy bank and saved everything my parents gave me. When I accrued enough money to buy a toy, mom would take me to the store and we’d get it. She would always make me feel great about that. All of us kids received an allowance based on a chart mom made for our chores. She had four of us, so she fared pretty well! But so did I, because I learned the value of saving at a very young age. According to another Schwab survey about Families and Money, children who regularly did chores became more financially responsible as young adults (as reported by their parents).
Moving into the mid-teen age, encouraging your teens to find a small job would not hurt. When I was 15, I went to the local YMCA and got some babysitting jobs. I made some good money, and mom suggested going to the bank and getting a savings passbook. I even bought the family pizza one Friday night, and I remember how proud I was of that. My brother and I also shoveled snow for a few bucks. If you were in most places in the United States this winter, there sure was plenty of money to be made (and then some).
As a junior in high school, I began work at a family restaurant and eventually became a waitress in my college years for the same family. While still living at home, I paid my mother a small amount of rent and also a share of the car insurance. These small bills taught me how to budget and mimicked “grown-up” bills.
It is crucial that you play an active role in ensuring your child’s financial maturity. Growing debt, increases in cost of living, and higher taxes only emphasize the importance of preparing your children for their financial futures. Lead by example (they watch you), encourage and praise small financial goals, and be honest. Sometimes sharing a financial mistake can build respect and better understanding.
Diana Palmieri is dually registered with Vanderbilt Securities LLC and H Beck Inc., which are unaffiliated. Securities offered through Vanderbilt Securities LLC, member SIPC/FINRA/MSRB.
