Despite the financial pessimism in today’s economy,
there is optimism on the horizon. One way that parents
can ensure their children are prepared to navigate
through the ups and downs of the economy is to make sure
they understand the financial facts of life. A recent
news report said that children are some of the major
victims of the recession.
April is Financial Literacy Month. One of the best gifts
you can give your child is to sit down with him or her
and explain the financial facts of life.
Begin by teaching them the most important fact—savings.
If children learn at an early age to save, they will be
better equipped to manage their finances and debts
conservatively. Teaching them to keep an emergency fund
will help them weather any financial storm.
If your child does not already have a savings account,
celebrate Financial Literacy Month by taking him or her
to the bank to open an account. Whenever they receive a
birthday check from Grandma, encourage your children to
put at least half in a savings account to save up for a
large ticket item they may want in the future.
As children get older and earn money from babysitting,
lawn mowing or other part-time jobs, go with them to
open a checking account. Encourage them to put some of
every paycheck in their savings account and the rest in
their checking account to help them with their
entertainment expenses.
Sit down as a family and review some of the recent
headlines in order to teach your child the difference in
“safe” investments and “risky” investments. Keeping
money in a bank is a “safe” investment since deposits
are insured by the federal government up to $250,000 per
account. Stocks and bonds are what we call “risky”
investments; however, they can yield a higher return on
investment.
It is also important to help your children understand
their net worth.
Total Assets: What is owned (home, retirement
plan, stocks)
Total Liabilities: What is owed (mortgage, credit
card balances, car loan, student loans)
Subtract liabilities from assets to determine Net
Worth.
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Parents differ on the pros and cons
of giving their child an allowance. However, an
allowance provides an opportunity for your child to
learn money management skills and to experiment without
losing too much in the process. They can learn to start
saving for long-term goals.
Let your children help you with simple financial tasks
such as preparing deposits or balancing the checkbook.
Let them observe as you pay bills, teaching them that
debts must be repaid in order to maintain a good credit
report. This exercise also will allow you to teach your
children the benefits of budgeting and help them
understand where their parents’ money goes and the
importance of avoiding overspending.
It is important that teenagers learn the importance of
recording every deposit and withdrawal, paying careful
attention to ATM withdrawals and debit card
transactions. This will provide a good foundation to
help them when they go off to college. Gone are the days
when your local banker would call and say “Mary is
overdrawn…again. How much money do you want to put into
her account?” Mom or Dad would tell him the correct
amount to transfer from their account to Mary’s account
and that was the end of it, at least until Mom or Dad
talked to Mary about her spending habits. Today, there
are bounced check fees, insufficient funds fees and
overdraft fees, all of which can be a very expensive
lesson for Mary—or her parents!
Today’s young people are very savvy when it comes to
using the Internet. However, it is important for them to
understand the importance of protecting themselves from
crooks who target teens. Stress to your children to
never give out social security numbers, bank card
information or passwords to any request via e-mail, no
matter how legitimate it may seem. These same types of
fraudulent requests can also come through phone text
messages or in the mail.
Financial Literacy Month provides the perfect time for
us all to do some spring cleaning on our finances so
that we are prepared for any financial bumps along the
road.
CONSUMER TIPS is provided as a public
service by the Missouri Independent Bankers Association
AND
Community Bank of the Ozarks
P.O. Box 43
Sunrise Beach, MO 65079
(573) 374-5245
1-800-927-4314
www.cbobanker.com
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