Americans may enjoy the world’s highest total individual wealth, but a global survey recently ranked the US 14th in financial literacy levels, and found that only 57 percent of adults in the United States displayed signs of using knowledge and other skills to manage financial resources.
In addition to low financial literacy rates, the S&P Ratings Global FinLit Survey reported that more than half of Americans have less than $1,000 in combined checking and savings accounts, with the average household carrying at least $15,000 in credit card debt.
Blount County-based certified financial planner Rose Swanger explained that the main reason the US is trailing in financial literacy levels is due to a cyclical lack of knowledge, perpetuated by parents.
“Nobody educates the kids and nobody even educates the parents,” she said, adding that the same financial mistakes made by parents often pop up again in future generations. “It’s up to us as parents to set good examples. They absorb what they see and hear from us, and our actions.”
According to Swanger, two-time winner of the highly-competitive Global PlanPlus Award, “it’s all basic common savings.”
“You have to do it yourself to learn,” she said. “Unfortunately, in today’s society, parents don’t know.”
To help build financial confidence and capabilities in youth, Swanger recommends that all parents help their children master three top concepts: earning an income, managing a checking account and paying themselves first through a routine monthly budget.
As a parent, Swanger used the same tactics with her own children.
Around age four or five, she began teaching basic common savings, such as the three S’s — saving, spending and sharing. At age 12, she introduced investments, so “they can make money and save money, as well.” At 16, Swanger’s children embarked on obtaining incomes of their own through part-time jobs.
“Kids do learn, but all those things have a very gradual, gradual process,” she said.
By encouraging math skills, sharing financial knowledge and encouraging discussions, as opposed to lectures, parents can ensure their children are on the right track toward a lifetime of financial well-being.
“Be open-minded and always, always, always communicate with your kids,” she explained. “People think it’s rude or impolite to talk about finances, but we need to open up with our kids. We should use every opportunity to talk with them.”
For parents who feel inadequately educated in the realm of personal finance, Swanger advises finding an expert through family or friends, and enrolling your child in Junior Achievement, a school program which teaches first through twelfth graders how to generate and manage their income.
Swanger, a Junior Achievement volunteer, said the program both changes children’s lives and motivates them to succeed.