President’s Advisory Council on Financial Literacy

I am following up my post of December 11th to let you know that the President’s Advisory Council on Financial Literacy will present its annual report on January 6th. The meeting is open to the public. To find out more, click here.


-John

President's Advisory Council on Financial Literacy

Just in case you weren't convinced of the importance of youth financial literacy...The President's Advisory Council on Financial Literacy (yes, there is one) is releasing a draft recommendation on how to advance advance financial literacy in the US (check out the top link).

-to expand and improve financial education for students from kindergarten through post-secondary education;

-to support the increasingly important role of employers as providers and conduits of financial education for their employees;

-to increase access to financial services for the millions of unbanked and underserved Americans;

-to identify and promote a standardized set of skills and behaviors that a financial education program should teach an individual; and

-to promote more awareness among Americans of the state of financial literacy and dedicate more resources toward educating Americans on how to improve that.

Granted, these are only recommendations, but it shines a bright light on the importance of teaching young kids (not to mention teens and adults) to share and save and spend smart. Lack of financial literacy in the US is like a disease that has infected our economy badly. It's so important that we marshall as many resources as possible to cure this disease.

You can find out more about the council by clicking here.

Mistakes Is Good

There may be no better teacher than a good, old-fashioned mistake.  For a time, my five-year-old daughter had been sinking all of her money into her Save jar after success with goal setting and managing her allowance effectively enough to buy a scooter, shoes and mini pottery wheel (long-term saving for a youngin').  Daddy was happy.  The lessons were working and it made good blog fodder.  But then, suddenly, she started plunking her allowance dollars into her Spend Smart jar.  What was this?!  Regression?  A big mistake?

Whatever it was, it was her choice and it remains to be seen whether she is making mistakes by shifting her focus from saving to spending.  What it certainly means is that Daddy has to heed his own advice to her - allow her to control her own money.  The purpose of the allowance is to teach her about money and making mistakes is part of that process.  We'll see what she does.  And after all, if she does slip up it's ok because, you know, mistakes is good.

-John

Graddad's Wisdom - Waiting Compounds the Problem

My grandfather, who grow up in the depression, tells me he doesn't recall a time when he wasn't saving money.  His advice when I headed into the adult world was "live below your means and understand the power of compound interest."   I wish I hadn't waited so long to heed his advice. 

Jason Alderman of Visa posted a very simple explanation of compound interest on the Practical Money Skills for Life site this week.  Here's an excerpt:

"What is compounding? Basically, it's where you put aside money – whether in savings, a retirement account or the stock market – and then essentially leave it alone. As your account earns interest or dividends, you continually reinvest those profits, generating (compounding) additional earnings at an accelerated rate."    

Although compound interest is not an easy concept to grasp, it's not a bad idea to get the concept into your child's head early.  The earlier they get it, the better off they'll be.

Click on the title link to read the entire article.

-John

Parental Reality - It's Up To Us

Parents,

To put it simply, financial literacy is up to us.  Don't believe me?  Take a look:

-80% of us think that schools provide classes on money management and budgeting to 

students.

-In reality, only 12% of Americans graduate from high school having learned anything about money at all.

And consider...

-71% of teens say they learn money management from us.

-And only 26% of us with children 5 or under feel prepared to teach their kid about basic personal finance.

Award-winning college professor and Jump$tart Coalition Board of Directors member, John Clow, says it best, "A financial literacy 'buck' is being passed from parents to teachers and back to parents again.  Parents assume that schools are teaching financial literacy, but schools, by and large, are not teaching it.  Teachers, like parents, don't feel comfortable." (The last point was a fact confirmed by Suze Orman on a recent Oprah episode.)

It's numbers like these that led us to create "The Money Mammals" to help not only engage, entertain and enrich kids' lives.  We've discovered, though, that by distilling the message down to its roots (needs vs. wants, making choices, spending smart and other basics) it really helps parents increase their own comfort level and carry forward the lessons from the show into their kids' lives.

We have a duty to teach our kids about the value of money.  Start today.  There really has never been a better time.

-John

Sources:  McCormick and Godstead, Learning Your Monetary ABC's (2006); FoxNews.com (2006); Fleet Boston Survey (2003)

Stop Reading to Your Kids!

I kid!  I kid!  You certainly wouldn't stop reading to your 2-, 3- or 4-year-olds because you know they can't read themselves.  Exposure to reading is a very important part of emergent literacy and will help them learn to read.  So why don't parents introduce simple money concepts like saving money to their kids at this age?  Ok, some do.  But most don't.  Why isn't "emergent financial literacy" considered just as important?  Just because your little one won't be able to tell you what a credit default swap is (if they can, please tell me) doesn't mean that they should be deprived of the essential building blocks to building good financial literacy habits down the road.  

Don't believe me?  Read the study, "Learning Your ABCs:  The Link Between Emergent Literacy and Early Childhood Financial Literacy" by Martha H. McCormick and David Godstead.

Please pass this message on to at least one person today.  You wouldn't dream of not exposing your kids to reading simply because they can't read.  Exposing them to "value of money" concepts (sharing, saving, spending smart) early is just as important because financial literacy is essential their future well-being.  Give preschoolers the tools to start building good financial habits.  Keep the message simple.  Start with saving.  Continue with sharing and then spending smart.  Want some help?  Try the "Thrive By Five" resource to the right.  Want to make it fun for kids?  Take a look at our Money Mammals program at www.themoneymammals.com.  

Oh...and don't stop reading to your kids.

-John

Turning the Corner

I see one huge silver lining in the current economic crisis our world is facing - financial literacy is already becoming a huge, hot topic.  I've seen a marked increase in articles promoting frugality and even teaching kids about money.  Not surprisingly, it takes a massive calamity to open people's eyes up to the importance of something.  Let's hope that the sudden new emphasis on frugality can lead us to the promised land - a nation of people who save at least 10% of our disposable income.  There's never been a better time for all of us to become money mammals.

-John