April is Financial Literacy Month: Teach Your Kids Smart Money Habits
Think back to your childhood years. What was your earliest money memory? Was it a recollection of listening to your parents discuss household money management? Maybe you remember your mom saying to your dad, “Our credit cards are out of control!” Or, “I can’t believe we still haven’t paid off that grad school student loan.”
Or maybe your first memory resulted from carefully laid-out lesson plans from a teacher, who allowed you to use fake money to buy a stock in the stock market. You “bought” Nike and that lesson stayed with you throughout adulthood — you “made” $1,000 that year.
Maybe you remember receiving a crisp $20 bill from your grandma the day you turned seven and planned all sorts of ways to spend your riches.
Whether your first money memory is good or bad, the importance of financial literacy is undeniable. Furthermore, it’s a good idea to instill excellent money habits in your children. In this piece, we’ll walk through how you can take advantage of that through Financial Literacy Month and look for teachable moments in everyday life (hint: going to the grocery story is a great place to start!)
What is Financial Literacy Month?
The month of April has been designated National Financial Literacy Month, also called National Financial Capability Month, since 2004, and is as relevant as ever.
But first, what is financial literacy, exactly?
There’s no “one” definition, but it can mean that you have the knowledge of key financial concepts, financial products, services and skills to reach your goals.
Financial literacy encompasses more than just knowing the knowledge and skills to deal with financial issues. Applying financial knowledge and skills as well and developing the motivation and confidence to understand a comprehensive overview of financial activities as manage your emotional and psychological factors of investing.
During Financial Literacy Month, financial institutions, nonprofits, and human service agencies increase their focus on the importance of financial literacy through events, programs, and counseling. The goal goes beyond helping consumers learn more about finances to helping them actually improve their personal and household financial stability and success.
The 2020 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index), is an annual survey measuring American adults’ financial literacy levels developed by the TIAA Institute and the Global Financial Literacy Excellence Center. The 28 questions include topics such as earning, consuming, saving, investing, borrowing/managing debt, insuring, comprehending risk and information sources.
Based on the results, many U.S. adults are not prepared to engage in sound financial decision-making. The survey revealed that many U.S. adults lack the ability to apply financial knowledge and skills in the context of real-life situations.
However, since the survey began in 2017, the percentage of questions answered correctly has risen by 1%, resulting in positive results.
Therefore, Financial Literacy Month has proven its need in the U.S.
Who Gets Involved in Financial Literacy Month?
Financial Literacy Month activities vary widely depending on your state, community and region. Some communities create events for local citizens and kids in school. Even as some communities push National Financial Literacy Month, other communities may not recognize the month at all.
The Jump$tart Coalition for Personal Financial Literacy can help you start the conversation about money by helping your talk to your kids about money rather than “teaching” them about every aspect of money — especially if you don’t consider yourself a complete money expert. Find your local Jump$tart affiliate here.
However, it’s important to recognize that you can get involved in Financial Literacy Month in many different ways, including the following:
- On your own
- Through your bank or credit union
- Through nonprofit credit counseling agencies
- Through schools and colleges
- Through libraries
- Through the military
- Through your book club
You can ask about personal finance activities planned for April at any one of these locations. For example, your local library may plan a talk by a local dynamic financial advisor. Your bank or credit union may want to give out informational pamphlets. Local schools and colleges might also want to feature the National Endowment for Financial Education or another nonprofit organization through a talk or to promote youth financial literacy day.
You can also look to your state governor or representative to push Financial Literacy Month. check with your state capitol and for special conferences with specific organizations and educational events and programs.
How to Teach Kids About Financial Literacy
Remember the first bullet point about taking advantage of Financial Literacy Month under the last header? If you can’t get your kids involved in any presentations, school activities or other events, you can teach your kids about financial literacy on your own. Try a few tips we’ve listed.
Put Some Money into Your Kids’ Hands
Let your kids have some money and teach them how to handle it. For example, let’s say you give your child $50 per month. Teach your child how to divide it into “to save,” “to spend” and “to give to charity” categories. (You’ll have to decide on the categories together.)
Try stressing the importance of the “saving” category. You may also want to introduce a “to invest” category as well. This aspect of financial wellness will likely carry them through their entire lives.
Let Your Kids Invest
Even though your kids can’t technically invest until they turn 18, you can invest for them. Why not open an account and let them choose a few stocks? They can track them and watch them grow over time. Note that younger kids won’t really “get” the investing initiatives you’re trying to instill, particularly because watching stocks can be really boring, even to middle school students.
However, older kids may get a kick out of seeing how their stock investment goes up over time.
Show Your Kids a Compound Interest Chart
Obviously, a compound interest chart will only make an impression on an older child. What’s a compound interest chart? Compound interest is interest that builds on interest. For example, you could show your child how it’s possible to become a millionaire as long as they invest just $2,000 each year for five years starting at age 16. It’s a great jumping-off point for starting a conversation about investing in a Roth IRA starting with your child’s first job.
Talk About Important Money Topics
It’s important to talk to your kids about your financial situation and financial well-being in the context of making solid choices about money.
You can talk with them about credit reports, retirement calculators and debt management. Add in a discussion about the importance of an emergency fund and the importance of having at least three to six months’ worth of expenses. Don’t be afraid to talk to your kids about the mistakes you’ve made, whether you haven’t spent enough time focusing on your credit or spent way too much money on your house.
Walk through budgets and how to handle everyday expenses, such as limiting spending at the grocery store or for holiday gifts.
Ideas to Take Full Advantage of Financial Literacy Month Yourself
In the spirit of Financial Literacy Month, April may give you a good opportunity to spruce up your own finances. Here are some ideas to kick off Financial Literacy Month from your own perspective:
- Upgrade your own financial education. Do you think you could stand to learn more about ETFs or stocks? Roth IRAs or 401(k)s? Make financial literacy the topic of your book club, watch some YouTube videos or subscribe to a reputable website that can give you more information about money.
- Talk to a financial advisor. Get a financial checkup with a fiduciary financial advisor. This individual can help you make great long-term plans for retirement, plans for short-term investing and more. A financial advisor will tell you where you’re lacking in your own finances and show you how to maximize your best money moves.
- Have a money date with your spouse or partner. Did you know that one of the top reasons of divorce (and arguments) relates to money? Put your efforts into having a money date, and try to keep that up at least once per month with your spouse or partner.
- Check your emergency fund. Are you saving enough in your emergency fund? If you’re not saving three to six months’ worth of income in an emergency fund, you’ll need to put more into it a money market fund or savings account.
- Put together a college fund. How much do you have saved for college for your children? Turn to UNest to help build a better future for your kids. Invest in your kids’ future and receive unlimited monetary contributions from friends and family.
Can you think of some other ways to celebrate Financial Literacy Month?
Why Financial Literacy Matters
Financial literacy matters because of the facts listed at the beginning of the article — that Americans don’t know much about financial literacy. Students aren’t learning about financial matters in school, either. In fact, only a handful of states require high school students to take a personal finance course before graduation.
Almost any parent will agree: It’s also important to pass on constructive financial knowledge to your children. Wouldn’t you like to help your children avoid poor financial decision-making that hinders their ability to meet their financial goals?
You can also check with your state’s department of finance and join with other individuals and organizations that promote personal financial responsibility.
Download the UNest app to get a jump-start on your child’s financial future.