New research shows that children who learn about personal finances early on are better at handling their money as adults. A study by the Federal Reserve showed that when kids are taught in school about personal finance, they tend to develop better personal finance habits and have higher credit scores in adulthood. This is certainly understandable given how little knowledge and experience many young adults have when it comes to budgeting their expenses and the benefits of saving early. Young adults are most likely unaware how credit cards really work, where paying only the minimum payments on credit cards will end up ultimately accruing substantial interest charges and taking several years to pay balances in full. Many parents assume these lessons are covered at some point in school and simply let their kids learn from their own mistakes.
Unfortunately, children typically do not learn financial literacy in school, so the responsibility of teaching children about money falls on the parents. Yet most parents are reluctant to discuss personal finance topics with their children. Some parents feel unqualified for these conversations and some are concerned that discussing money will only make their children feel worried. In a recent T. Rowe Price survey, about 72% of parents confirmed that they did not feel comfortable discussing personal finances with their children. Over half (58%) figured that letting their children learn the hard way, by making personal finance mistakes and learning from experience, is a good approach. However, only about 20% of kids feel knowledgeable about how credit cards and student loan debt work, and they typically are not ready for the responsibility without any guidance.
Nearly all parents (91%) felt as though it would be more appropriate for the schools to be teaching these subjects, and 75% of parents said a course in personal finance should be a high school graduation requirement. In a separate study, about 89% of teachers agreed with parents that all high school students should be required to learn about finance. Currently, only 17 of the 50 states require a personal finance class in high school. The Federal Reserve study shows that students in those 17 states are better at handling their personal finances as adults, have higher average credit scores and lower delinquency rates with respect to paying off their debts.
Given that it is primarily the responsibility of parents to teach their children about personal finance, it is important to know which topics are age appropriate. Children as young as 4 years old can understand the concept of savings. One great way to teach this lesson is to provide two small pieces of candy each day for a week and encourage them to save one. At the end of the week, they’ll have a full bag of candy! As 8 year-olds, they can begin to understand budgeting and how to track spending. They can practice tracking expenses on a family vacation, for instance. At this age, they can also learn how loans and accrued interest work and can understand common sources of debt like mortgage loans, auto loans, and credit cards. Between the ages of 10 and 12, children can learn about taxes, why we pay taxes, and about ways to lower taxes through deductions like donating to charity. In the early teens, children can begin to understand how to earn money through investing, the stock market, and retirement accounts.
There are even smartphone apps children can use to learn about personal finance topics. Savings Spree is an app that has games for children that incorporate concepts of weighing the consequences of saving, spending and investing in the context of a cupcake business. PiggyBot is a digital piggy bank to help children visualize their allowance savings. Children can even practice using a budget to rescue endangered animals in Green$treets: Unleash the Loot! It is clear that children benefit from learning personal finance at a young age, and they bring that knowledge into adulthood. While teaching these concepts in schools will hopefully become increasingly common, it is still up to parents to bear the responsibility.
2015 Tax Due Dates:
July 31st –
2nd quarter 2015 employer payroll tax returns due
August 31st –
Monthly Illinois wage report for July due (employers with 25 or more employees)
September 15th –
3rd estimated tax payments for 2015 due for Individuals and Corporations
Extended C and S – Corporation income tax returns due
Extended Partnership income tax returns due
About The Author - Steven Pearce, is ECS's newest staff accountant having started early in 2015. He is also ECS's business development consultant, supporting marketing and client acquisition activities for the firm. Mr. Pearce received his Master of Science Degree in Accountancy from California State University of Sacramento. He is a QuickBooks ProAdvisor – Online and is pursuing the Certified Public Accountant designation. His experience includes financial statement compilations, income tax preparation for individuals, trusts, corporations and partnerships, as well as preparation of payroll tax and sales and use tax returns. Prior to ECS, Mr. Pearce worked in organizational development for the largest health system in Illinois, Advocate Health Care, where he facilitated performance improvement projects and analyzed trends in clinical health outcomes and patient satisfaction.