EAU CLAIRE, Wis. (WEAU) – Are your kids heading towards financial failure? According to a new study by the Organization for Economic Cooperation and Development, American teens aren’t doing so well on finance and are unable to make simple decisions on spending.
The OECD looked at teenagers’ understanding of money. It measures the aptitude of 15-year-olds; everything from bank accounts to credit cards, taxes and savings.
Compared to 18 other countries, American teens ranked right in the middle of the pack at 9th place. It also found around one in six teenagers have trouble making decisions about spending money. Experts say that’s bad news for a generation where college debt is a rising problem.
Shadoe Settle is the Royal Credit Union’s Young and Free Royal spokester. Her job is to help the 25-and-unders make sense of banking and money.
“I think the best way is to get kids involved really early, so when you're planning a trip or doing something fun. Get them involved, let them make decisions and if you can't afford something, don't say ‘we can't afford it’. Say why and explain other bills,” said Settle.
Colin and Erin Harsh were at Owen Park having a picnic while their 3 ½ and 5 ½ -year-old sons were playing at the playground. They’re teaching their boys early-on that being money-smart is important.
“We've been trying to teach them to save up some money so they can save up maybe buy something they really, really want. So we kind of teach them to set financial goals,” said Colin.
The boys even have their own piggy banks.
“So they have one spot they keep it safe. They can go back and count it and they reach an amount that they want or they find a prize they want to go for. They can get into their piggy bank and spend their money,” said Erin.
Settle said parents should also set an example on how they manage their money. She said not all schools are required to teach finance which can also make it tougher for kids to be financially literate.
“It’s really important to start teaching kids at home because otherwise when they get on their own and they turn 18 and move out on their own, they don't know what it’s like to pay bills they don't know what it’s like to plan a budget,” said Settle.
Some other tips:
-Set an allowance
-Let your kids earn money through chores which gives them responsibility
-Help your child open a savings account
-If they want to buy something, setup a savings goal chart. That way they can keep track of how much they need to save.
“Give them some sort of responsibility so they know what money is really worth,” said Settle.
And there are mistakes to avoid when your kids move out on their own.
“I think one of the biggest mistakes students make is spending their leftover scholarship money or left over student loan money,” said Settle.
She said to teach your soon-to-be college students that student loans have to be paid back and credit cards do too. That’s why she said it’s important to pay more than just the monthly balance for all debt.