How Americans Rank When It Comes to Discussing Money With Kids
Much has been made of the sorry state of financial literacy in the U.S. So it was eye-opening to sit in on the Financial Literacy and Education Summit, sponsored by the Federal Reserve Bank of Chicago and Visa, and to see how this country stacks up against the rest of the world.
At this sixth annual summit, I announced the results of the 2012 Global Financial Literacy Barometer, which surveyed residents of 28 countries. The U.S. finished fourth, behind Brazil, Mexico and Australia. Obviously, the U.S. could have done better. But given the concern about financial capability, it was somewhat surprising that we fared as well as we did.
In the survey, which was commissioned by Visa, respondents were asked whether they discuss financial issues with their children, and whether they think teens and young adults in their country were adequately prepared to manage their money. They were also asked about their own money management habits -- whether they follow a household budget and how much money they have saved for a financial emergency.
Overall, a majority of respondents in more than half of the countries thought that their kids didn’t understand money-management basics, such as budgeting, saving, managing debt and spending responsibly. In the U.S., a whopping 70.5% of those surveyed shared that sentiment, putting the U.S. at the bottom of the pack in parents’ opinion of their kids’ financial savvy.
That could be because people in other countries spend more time talking with their children about finances. Mexicans estimated they talk to their kids about money-management issues on about 42 days per year, and Brazilians said 38 days. In the U.S., the figure was about 26 days. In general, parents in wealthier nations spent less time talking to their children about money, and the U.S. fell into the middle of that group.
In addition, residents of other countries felt that schools should be required to teach financial education at an earlier age than did Americans. The worldwide average was 11 years old, compared with about age 12 in the U.S. and age 9 in top-ranking Brazil.
On the budgeting question, the U.S. finished a surprisingly high sixth, with 54% of respondents saying that they follow a budget closely or most of the time. But that doesn’t necessarily translate into higher savings. The Chinese were the world’s best savers, with 3.9 months’ worth of expenses, on average, squirreled away. In the U.S., the figure was 2.9 months. Worldwide, 68% of respondents said they have fewer than three months’ worth of emergency savings.
As sobering as the statistics may be, I’m always encouraged by how quickly kids can sharpen their financial skills when presented with a lesson that engages their interest. One of the events at the financial summit was a rousing game of Financial Football (www.practicalmoneyskills.com), a video game developed by Visa for students ages 11 and up. Two teams of students, from Vernon Hills High School and Libertyville High School, both north of Chicago, gained yardage and scored points by correctly answering multiple-choice questions on a wide variety of financial topics. Example: “A check card is the same as: 1) a gas card; 2) a debit card; 3) a credit card; or 4) a membership card.”
And I hope the kids will remember the takeaway from Chicago Bears linebacker Lance Briggs, who was a guest “coach”: “If you’re driving a bucket and you want a fancy car, keep the bucket until you can comfortably afford the car. If it’s worth having, it’s worth waiting for.”
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