Parents can do more to promote financial literacy

05.05.09
By Sarah Beldo

Amid the current recession, there has been a lot of talk about how improved financial literacy could potentially help the country prevent a similar situation in the future.

And the best place to prepare the younger generation to meet the challenges of the future? Many would say these lessons should begin in the home.

However, a new survey by TrueCredit.com suggests that parents could be doing more to provide their children with important guidance that can help them avoid credit card debt and empower them to responsibly manage their finances.

According to the poll, nearly one-fifth of parents admit they have never discussed money basics with their children. For many, this reluctance seems to have been passed down through the generations, with 65 percent explaining that their own parents did not give them financial guidance.

Among those who are teaching their kids about money, an allowance is a popular educational tool, with 71 percent of all respondents saying they require their children to make their own purchases with their weekly stipend.

But TrueCredit.com suggests parents go one step further and help their kids learn how to create a budget for their allowance, a vital skill for successful money management. For starters, budgeting can help youngsters understand the difference between wants and needs.

Meanwhile, when children are older, the website recommends moms and dads consider adding them as authorized users on their credit card, in order to teach responsible spending habits in a controlled environment.

Learning the basics of interest rates, minimum payments and how to understand a credit card bill can help set children in good stead to avoid excessive debt and maintain a good credit score in the future.

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Budgeting can help youngsters understand the difference between wants and needs.