DULUTH, Ga. (8/19/13)--More than 52% of respondents to the Georgia Credit Union Affiliates' Midyear 2013 Consumer Survey report their children do not have savings accounts at financial institutions.
This provides credit unions with an opportunity to promote children's savings accounts with their members and also attract youth at an early stage to see the benefits of credit union membership.
National statistics paint a bleak picture of financial literacy among young people. Only 27% of young adults possess basic knowledge of interest rates, inflation and risk diversification, according to the National Bureau of Economic Research.
Also, The 2012 Consumer Financial Literacy Survey indicates that 44% of Americans continue to learn about financial literacy primarily from their parents or at home.
GCUA's survey shows how parents can better equip their children to manage their finances responsibly.
GCUA's tips to teach kids about managing money:
Provide an allowance. Children learn by doing. Base the amount of the allowance on a child's age, maturity and the cost of living in one's area. As children grow, increase the allowance and let them take over buying some necessities.
Let them do some of the research. Some parents require their children to find out how much money they need for something they want and to submit detailed "budget" requests in writing. These can become the basis for negotiating allowances. This practice works especially well when they go off to college and the amounts under discussion go from tens and hundreds, to thousands of dollars.
Don't penalize children for working. Reducing allowances when children get a job punishes them for taking the initiative.
Encourage (or require) regular saving. Open a credit union savings account in children's names. Then encourage them to put a percentage of what they earn or receive as a gift into savings. Use this to teach them how to put money aside for big expenses.
Teach by example. It's still the best teacher. Believe it or not, children do pay attention to what parents do, including how they manage money. So parents should make sure to practice what they preach.