blog.weProsper.org

There’s no avoiding the topic. The recession is on everyone’s mind, neighborhood stores are closing, and friends and family may even be losing their jobs. The media is talking about the financial markets non-stop, so what better opportunity to talk to your child about money, and help them increase their financial literacy.

No matter their age, children are intuitive and they will pick up on tension and stress in the home. It’s important to make sure that your children understand that this financial crisis is not the fault of anyone in your family—especially them—but that it is affecting people around the world. Don’t sugarcoat the truth, but do reassure them that you will get through this together as a family.

Let them ask questions, and address their concerns. As a family, take a proactive approach to financial planning. Build a household budget, set savings goals, and encourage your children to contribute their own ideas on how to pitch in and save. There is no better time to teach your children the life skills they will need to succeed in even the toughest economic climate.

That’s what the headline of yesterday’s article in the Seattle Post-Intelligencer asks. The article highlights the debate that is currently underway in school districts across the country. Some argue that states should mandate personal finance education, while others contend that parents should be responsible for teaching their children these life skills.

What’s not up for debate is the fact that too many Americans are now suffering because they signed mortgages they couldn’t afford, applied for credit they didn’t understand, and lacked the skills to build a financial safety net of savings.

As Charles Schwab, chairman of The President’s Advisory Council on Financial Literacy, wrote in a January report, “While there are many causes to the economic problems facing the country, it is undeniable that a lack of financial literacy is a contributing factor.”

At weProsper, we believe that financial literacy should be a part of state education standards, and we are working with organizations like Jump$tart and Junior Achievement to bring personal finance education into schools nationwide. However, learning does not end in the classroom. Without the cooperation of parents, educators, financial institutions, and communities, we cannot build a better financial future for our children. We all must work together to improve financial literacy.

We’ve all been told a hundred times to save for a rainy day, but most of us never expected to be caught out in a storm without an umbrella. Unfortunately, with unemployment now reaching record numbers and layoffs affecting all different sectors, blue and white collar alike, millions of Americans are now at risk of getting washed away.

According to the Bureau of Economic Analysis, the personal saving rate in the United States dipped below zero in 2005 and averaged just over 0.5% in 2007. Most don’t have enough in savings to cover their living expenses, let alone pay down their accumulated debt. Defaults are on the rise as credit card payments become increasingly difficult to manage, and cities across the country are seeing the highest levels of foreclosures ever.

While we can’t undo the past, we can change our behavior to better prepare for the future. There’s a lot of wisdom to that old adage about the rainy day. The path to financial security starts with incremental steps, and even by saving a little each day you can build up your rainy day fund faster than you think. Switch your $4 latte habit to home-brewed Joe and bank an extra $1000 this year. Commute on public transit or carpool and watch your gas bills plummet. And while you’re making lunch for the kids, pack an extra one for yourself. PB&J once a week won’t hurt your waistband, or your budget.

As the Obama administration’s current stimulus plan makes its way through Congress, questions about consumer spending swirl around the debate. Some believe that more tax cuts are needed to stimulate consumer spending and bolster the economy, while others argue that irresponsible spending was one of the many factors contributing to the crisis.

The U.S. consumer debt load is now measured in the trillions and continues to climb every year. The more debt we carry, the more we must work simply to pay the interest. Recent figures indicate that the average consumer spends 90% of disposable income paying down debt. This has many consequences, including overwhelming financial stress, people working late in their lives, and the leveraging of our children’s futures.

Statistics:

* The current generation spends $1.22 dollars for every dollar earned
* There are 1.2 billion credit cards in the U.S.
* 60% of all credit card users carry a balance from month to month
* 13% of the population owes $25k or more and carry a balance every month
* $15 billion dollars are spent in late fees every year by U.S. citizens
* 30% of profit from credit card companies is from late penalties
* 1 in 4 bankruptcies are filed by people under the age of 25

weProsper aims to teach young people about financial literacy so that they can better understand the complexities and consequences of consumer debt. By learning good habits early in life, children and teenagers will be better equipped to maintain control of their finances and avoid the dangers of credit card debt. Don’t become another statistic: read more about how iThryv Professor can help kids succeed.