Thursday, April 17, 2008

What Is Your Kid's Financial IQ?

High-school seniors, on average, answered correctly only 48.3 percent of questions about personal finance and economics. It used to be 52% till last year - so our kids are not exactly getting smarter when it comes to money. A recent survey by the Federal Reserve was not very encouraging. Fed Reserve Chairman - Ben Bernanke had the following comment

"The financial preparedness of our nation's youth is essential to their well-being and of vital importance to our economic future.

In light of the problems that have arisen in the subprime mortgage market, we are reminded of how critically important it is for individuals to become financially literate at an early age so that they are better prepared to make decisions and navigate an increasingly complex financial marketplace."

On this topic I have to agree with Mr.Bernanke. Financial education has to start early, start at home and focus on real life.

Parents play a big role in inculcating money habits in their kids by being role models. When parents demonstrate sound financial thinking and decisions - the kids will pick up the same. Unfortunately - the converse is also true.

Ultimately money management is about - responsibility (you reap what you sow), planning (today and tomorrow), honesty (need or want), respect (time and value) and commitment (persistence and resolve).

Here are a couple of good articles on how to teach kids about money - How to Teach Your Kids About Money and Teach Your Children the Value of Money.

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