Retirement planning clients often come into my Bakersfield office panicked and frustrated that their nest eggs are cracking under the weight of their children’s mounting college loan debts and helping them cope with financial problems.
The handwringing always involves two common questions: What can I do? How can I ever save enough to finance my retirement?
I advise them to help their children become more financially literate.
Using a six-question survey distributed to thousands of Americans, the Financial Industry Regulatory Authority reported in 2016 that “many Americans demonstrate relatively low levels of financial literacy and have difficulty applying financial decision-making skills to real-life situations.”
One survey question read: “Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have?” To take the quiz and read the other FINRA findings, go to http://www.usfinancialcapability.org/quiz.php.
A separate international study by the Organization for Economic Cooperation and Development found America’s 15-year-olds ranked in the middle of 18 countries surveyed and many appeared confused by money matters. But teenagers are not alone. A survey of adults by the American College of Financial Services found 80 percent struggle with balancing their finances.
You would have thought the Great Recession of 2008-2009 would have focused Americans’ attention on financial issues. But Fortune magazine recently concluded in its study that today’s more “confident” Americans have lost their financial focus or never had it in the first place.
So while schools across the nation appear to be falling short with the next generation’s financial literacy education, in many homes, parents also lack the interest or financial skills to make up the difference.
Basic understanding of interest rates, for example, can go a long way in helping students and their families when it comes to evaluating college financing plans that include loans that result in decades of indebtedness. Basic understanding of the difference between wants and needs and the concept of budgeting can mean that today’s students and their parents can create more financially secure futures.
Clearly, more can and should be done to offer relevant and practical financial education to students in schools. The quality today varies from state to state, with some requiring courses and others just suggesting them, with some requiring specialized teachers and others assigning classes as extra duty to staff.
Parents must not wait for the nation’s schools to step up and save the day. There are things we all can do to help our children and ourselves.
A parent came into my office recently. He was worried about his children’s lack of basic financial knowledge. But he was optimistic. He had learned about the FutureSmart Digital program, which was launched in 2015 by The MassMutual Foundation in partnership with EVERFI, an education technology company.
Focused on middle school students, the program can be viewed at www.massmutual.com/about-us/corporate-responsibility/futuresmart. The foundation has a goal of improving the financial skills of 2 million students by 2020. It is one of many online digital programs being offered by private companies and nonprofit organizations.
In addition to encouraging schools to incorporate such programs into their curriculum or buying digital tutorials for at-home use, there are many simple things a parent can do every day to improve a child’s understanding of the financial world.
Seize financial education opportunities. Expose children to money and financial decisions at an early age. For example, kids should not just “tag along” on a trip to the grocery store. Involve them in decision-making and comparison shopping. Help them bridge the gap between learning and applying financial concepts.
Discuss home budgets and spending decisions with your child. Discuss such concepts as needs versus wants, budgeting and costs. Weigh the cost benefits of purchases.
Take your child to a bank where staff can explain banking. Some banks will open small accounts to give children the “feel” of saving.
Discuss the connection between credit cards and money. If adults are losing sight of this debt-building connection, why should we just expect children to understand?
Look around your home and everyday life. Financial lessons abound. And it is by teaching the next generation these lessons that we all will be more financially secure.
Steven Van Metre is a Bakersfield certified financial planner who specializes in retirement income strategies and teaches courses on retirement planning for the Levan Institute for Lifelong Learning at Bakersfield College. Go to www.bakersfieldcollege.edu/levaninstitute to sign up for one of his courses offered in February.