Before he passed away, Jim Rohn, known as “America’s Foremost Business Philosopher,” often talked about “a child and a dollar.” Here’s an excerpt from his wise words on educating kids about money:
“What should a child do with a dollar? Here's one philosophy: It's only a child and it's only a dollar, so what difference does it make? Wow, what a philosophy! Where do you suppose everything starts for the future? Here's where it starts - it starts with a child and a dollar. You say, ‘Well, he's only a child once. Let him spend it all.’ Well, when would you hope that would stop? When he's fifty and broke like you?”
He spoke these words long ago, but they still ring true. The vast majority of seniors graduating from high school have received no education on personal finance. They may have studied economics and learned about supply and demand, yet they leave school not knowing how a credit card works.
College students and graduates haven’t fared much better. Financial institutions know about their financial naivete, and many take advantage of these young adults by sending them pre-approved credit card offers when they’re still in college. The pursuit by the banks intensifies when the students graduate.
You’re fortunate if you grew up in a home where family finances were openly discussed. Unfortunately, most parents don’t share with their children even the basics of personal financial management.
The root cause of this is often embarrassment on the part of the parent. They were never schooled on personal finance growing up, and they’re paying the price for it now. Many have racked up credit card balances they can only make the minimum payment on, have little to no emergency savings available, are not saving for retirement, and live paycheck to paycheck.
When reading about the millions of dollars that athletes and entertainers are paid, some kids are led to ask a parent, “How much do you make?” This is often when the adult shuts the door on any discussions concerning money. As a result, kids are paying the price later in life.
A lack of financial education can lead to some dire results for young adults. Jim Rohn also said, “Ignorance isn’t bliss; it’s financial devastation.”
These are just a few of the truly horrible decisions young people have made with their money:
- Having to use the big swimming pool they had built as their water supply because they didn’t have enough money to pay the water bill.
- Being surprised by an enormous medical bill because they didn’t know how much more it costs to go to the emergency room than a clinic.
- Taking out a 96-month car loan.
- Cashing in their savings and retirement accounts to open a business they knew nothing about.
- Spending six figures on a wedding and living in an apartment as newlyweds — without furniture.
And the list goes on.
Many researchers have discovered that students coming from low-income backgrounds, in particular, receive no financial education at home or school. As a result, their drop-out rate is higher than average, leading to a cycle of low-income jobs and little exposure to any helpful discussions about money.
Students from low-income backgrounds who move on to higher education are still expected to make major financial decisions concerning student loans and budgeting for living expenses.
Currently, only six states mandate a stand-alone personal finance course in high school: Utah, Missouri, Tennessee, North Carolina, Alabama, and Virginia. There are some states that require that a course be offered, but not taken.
The good news is that 25 states and the District of Columbia have introduced bills in 2021 to increase access to financial education. These bills range from forming commissions and task forces to developing standards for course content. Their goal: ensure that every high school student takes a personal finance course before graduating.
High schoolers and college kids spend hour upon hour looking at their phones or surfing the Internet. Unfortunately, the majority of that time is being spent on TikTok or Instagram.
For those young adults who want to assume personal responsibility for their financial destiny and will invest the time, many websites and apps have all the information they need to learn the basic tenants of personal money management.
These are five essentials you’ll find in personal finance books and online.
Learn how to budget
The root cause of people living paycheck-to-paycheck is not living on a budget. Their money is often spent on too many non-essentials and not earmarked for necessities — they’re spending major money on minor things. Budgets are the way you tell your money where to go. Many online tools are available that can help people make a budget and stick to it.
Learn to use credit cards responsibly
Credit cards can be a helpful financial tool if not abused. They can help a young adult build good credit or repair a poor credit score. Some of the best advice on the use of credit cards is, “Don’t use credit cards for any unexpected expenses and don’t use them to buy something you simply cannot afford that month.”
Learn to pay yourself first
Everyone else is lined up to take your money when you get paid; why are you last in line? Developing the discipline to pay yourself first will pay huge dividends throughout your life. You’ll have an ample emergency fund in place to pay for unexpected expenses, you’ll have a “rainy day fund,” be able to pay off student loans early, and have a financially stable retirement.
Learn to invest wisely
Learning how to make money is one thing; learning where to put it is another. Someone who wants to master their personal finances will learn about investing, particularly investing through an IRA, their 401(k) at work, or with some of the mutual funds they can invest in individually. Attending free workshops online or in-person can help get you on the right track.
Learn to live within your means
You’ll go broke “keeping up with the Jones’s.” Financing that sportscar you can’t afford or pulling out your credit card to buy the latest fashions is a sure way to end up driving what you don’t want to drive and wearing what you don’t want to wear. As one personal finance guru put it, “Live today like you need to so you can live tomorrow like you want to.”
[ Related: How to live within your means ]
Education on personal finance can and should be taught to kids by their parents and the educational system. “Money talks” - our young ones need to learn the language sooner rather than later.
Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.
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