“Hey, Mom, who keeps up with our family budget?”
“Dad, what are the deductibles on our car insurance policies?”
“Are you investing in your 401K at work?”
Can you imagine your teenager coming home from school asking questions like these? It just might happen sooner than you think. Starting this fall, several schools across Oklahoma implemented HB 1476, Oklahoma’s Passport to Financial Literacy. Students in every Oklahoma public school will soon be required to complete 14 areas of instruction as part of their high school graduation requirements. These broad areas of topics include earning an income, taxes, balancing a checkbook, financial services, insurance, housing, bankruptcy, gambling, fraud and identity theft, savings and investing, retirement planning, charitable contributions, credit cards and borrowing money.
School districts have a great deal of flexibility for implementing the new state requirements. For example, the districts can start a new class or integrate the topics into one or more existing classes. Districts can also choose to teach the topics at one or more grade levels, as long as they are completed in grades 7-12.
The primary intent of the new legislation is to help students make more informed financial choices and to show students how individual choices will impact the ability to meet their personal goals. In addition, it will help them become better consumers, savers, investors, and money managers. You can reinforce the topics being taught in our public schools by taking the following steps with your children:
1. Talk to your children about money. Young people should be involved in discussions about family finances. Whether buying a new car, planning a vacation, making plans for the holidays, or going to the grocery store, children can learn the value of money. Discussing the amount of the house payment or utility bills will give them an idea of the cost of living and help prepare them for the real world.
2. Encourage them to find ways to earn an income. Young children may start by walking the neighbor’s dog, pet sitting, helping with chores around the house, or opening a frontyard lemonade stand. Older children can babysit, mow yards, clean house, or wash cars. Earning an income helps them connect work with money.
3. Set up a savings account. Once children have earned an income or received an allowance, require them to pay themselves first by putting a minimum of 10% of their earnings into their savings account. Starting a pattern of savings while they are young sends the message that saving is important. You may even want to match their amount as an incentive to save for future expenditures.
4. Help them set up a budget for their monthly expenses. Instead of buying everything for them, encourage children to establish a spending plan for clothes, school supplies, charitable contributions, gifts, and other things they want to buy. Working from a budget builds personal responsibility.
5. Take them along to the bank or your financial planner. Involving them in the process will help them understand the importance of building a relationship with financial service providers.
6. Open a checking account in their name. Setting up an account will allow them to learn how to manage their money, balance their account, and reconcile their statements each month. You may want to get them a debit card to help them understand how to record purchases and cash withdrawals on their account. Learning how to manage their accounts will keep them from incurring costly fees and potential legal problems.
7. Teach them to set goals. Having personal and financial goals is one of the best ways to ensure children learn the importance of money. Few goals can be achieved without sufficient savings or financial resources to get there. Help them establish short-term goals that can be met in a year or less and longterm goals that take several years to accomplish.
Sue Lynn Sasser, PhD, is an associate professor of economics at the University of Central Oklahoma.