The term financial literacy is bandied about a lot these days given our no-end-in-sight tough economic times. Indeed, the Obama administration is making a push to ensure that the subject is taught in all our schools starting with children as young as three. It’s ironic, though, considering the federal government’s penchant for spending that had us peering over a fiscal cliff and now has us butting our heads up against a debt ceiling which currently stands at an astounding $16.4 trillion.
Speaking about the debt limit, here’s what then Senator Obama said in 2006 before voting against raising it:
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies . . . Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
Eloquent and well worth rereading.
Jump ahead to 2013 and a recent AP headline that read, “Obama demands quick action to raise debt limit.” Yes, he demands what years ago he said represented a failure of leadership and fiscal responsibility And now writes USA Today’s Aamer Madhami, “President Obama on Monday slammed Republicans who are resisting an increase in the debt ceiling without further spending cuts and again vowed that he won’t negotiate on that issue.”
So there you have it.
Countering Obama’s stand, of course, is House Speaker John Boehner who said, “The consequences of failing to increase the debt ceiling are real, but so, too, are the consequences of allowing our spending problem to go unresolved.” That line is worth rereading, too.
Meanwhile, in case you’re not yet convinced that all this spending and borrowing is a big problem for America, Jerry Bloom puts it all out there from a household’s perspective:
“In science and engineering, the use of Scientific Notation is used to handle large numbers. This is interesting because it does the same thing where it can be understood by those of us who are mathematically challenged:
Lesson #1:
- U.S. tax revenue: $2,170,000,000,000
- Federal budget: $3,820,000,000,000
- New debt: $1,650,000,000,000
- National debt: $14,271,000,000,000
- Recent budget cuts: $38,500,000,000
Let’s remove 8 zeros and pretend it’s a household budget:
- Annual family income: $21,700
- Money the family spent: $38,200
- New debt on the credit card: $16,500
- Outstanding balance on the credit card: $142,710
- Total budget cuts: $385
Got it?”
It can’t be made any clearer. This is no way to run a government nor is it any way to run our households, and your kids need to know. Don’t wait for Financial Literacy Month in April or depend solely on your school to teach them how to manage money. That begins at home.
Not sure, though, when to start? David Bach, author of Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age, suggests, “Hold up a $1 bill and a $100 bill. If your kid knows which one he wants, it’s time.”
The most important rule of thumb is to model the behavior you want to see in your children. First teach them the difference between wanting and needing. Meanwhile, set up and share the family budget, putting bill paying and shopping for essentials as your top priorities—saving and/or investing, as well. Shop wisely, too, always looking out for bargains and sales. At the same time, use that credit card judiciously, keeping the balance in check instead of allowing it to mount up as if Visa were your personal lending tree.
And as said, keep the kids in the money spending and saving loop, taking your lead from Ken Domato, founder and chief executive of DoughMain.com, which is hailed as “the best FREE way to organize your family . . . and teach them about money, too.” Among other tips, he suggests that you:
- Let your child help keep track of spending when out and about, whether in a restaurant, supermarket, theme park, etc., making sure expenditures are in keeping with the family budget.
- Create a matched savings plan, matching your kids’ contributions much as a company does with a 401K.
- Use allowance as a tool to teach financial literacy, assigning and connecting it to age-appropriate chores, such as dusting and vacuuming.
- Keep some chores on a not-for-pay basis to teach responsibility.
- Encourage your teen to take on odd jobs, such as babysitting and grass mowing.
- Help your child divide his/her allowance/earnings between savings, spending, and giving, with savings taking the lion’s share.
- Help your child establish savings goals and set up a savings account for her/him.
And speaking of setting money aside for a rainy day, two local banks make that easy by offering kid-friend savings accounts:
- PNC’s ‘S’ is for Savings: With this account, youngsters learn the basics of finance via interactive, online experiences with tips from Sesame Street, helping them save and make wise money choices.
- Univest’s Eaglet Savings Account: Open this account, and Univest will make an automatic $10 deposit for your child; there are also perks along the savings way. Moreover, a minimum balance is not required nor are there any monthly fees.
In other words, take to heart all this talk about debt ceilings, borrowing limits, and defaulting on payments, using the federal government as a model for how not to oversee your household budget. At the same time, gift your child with financial know-how and make wise spending and saving your family’s bottom line.
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