The United States has an epidemic. The name of the disease is financial illiteracy. Due to many reasons the majority of Americans would fail a basic test financial aptitude exam. One solution to the problem is to properly educate our countries youth, Three strategies are showing them their account statements, talking to them about money, and creating an incentive program.
Most kids are visual learners. By showing them graphs on financial statements for their accounts they can see how their money is growing. There is no better way to demonstrate the miracle of compounding interest than with real money. The statement can serve as their textbook for many lessons including investment costs and portfolio diversification.
Another great way to educate kids about money is to discuss it with them. Tell them stories about relatives and friends that have to do with both financial success and failure. Kids love to hear stories. Choosing tales that have a financial moral will enable the child to make a real world connection and enhance their learning.
Finally, create an incentive program. If your child opens up a savings account offer to match their contribution dollar for dollar. This teaches two important lessons. The first being the power of delayed gratification and the second being the aforementioned miracle of compound interest.
Most of what kids learn are picked up at home. This includes critical financial skills. Start today and help our country cure this epidemic.
Anthony is currently heading the Educator/403(b) Division at Ritholtz Wealth Management LLC. The goal of our division is to transform the way teachers save for retirement. For disclosure information please see here.