Educating Yourself Leads to Educating Your Kids
With most grown men and women saying they could benefit from more financial education, it’s no wonder the majority of young adults know little to nothing about finances and saving.
A whopping three out of four adults (that’s 75 percent) say advice and answers to everyday financial questions from a professional would help them, according to the 2015 Consumer Financial Literacy Survey prepared for the National Foundation for Credit Counseling.
So, though April is ending, and thus so is this year’s Financial Literacy Month, we at Meriwest Credit Union want to impart that financial education is something everyone should be aware of year-round, every year. Education is, of course, important because it helps lead to implementation, which could help many people save for unexpected (and expected, but down-the-road) situations.
Planning ahead is important since according to Fox Business, a majority of parents have insufficient emergency funds to cover at least three months’ worth of living expenses and almost a quarter of parents have used retirement savings for nonessential expenses, such as vacations.
Implementation doesn’t just magically happen, even with all the knowledge some people still fail to save, which is why some sort of plan is crucial. Most experts advise consumers to save three to six months of expenses in an emergency fund.
However, some people like Pamela Yellen, financial expert and New York Times best-selling author, say more savings are necessary according to Fox Business. "We found that you could lose your job and not get another job for two years or longer. My advice is that your rainy day fund should be equal to two years of your household income,” she said. "If you increase the amount you’re putting away each year by just one to two percent, you’ll find that you won't really feel the pinch. You’re going to be amazed at how much your liquid savings can grow."
Self-Control Can Help Be Instilled in Children Early On
As with most habits, teaching kids proper saving techniques earlier helps ensure they have a firmer grasp on the behavior as they grow older. So don’t be afraid to bring the topic up with your children.
“If you don’t start the discipline of saving early in life, it’s more difficult to break the spending habits and save throughout your life,” Chairman of the American Institute of Certified Public Accountants National CPA Financial Literacy Commission Greg Anton said. “Without a cash down payment you will likely not be able to obtain a loan to purchase a car or a home.”
If you are interested in behaviors related to delayed gratification, the “marshmallow test” may intrigue you: In a "surprise room" of the Stanford University's laboratory nursery school, kids were offered the choice of a cookie, pretzel stick or marshmallow.
The researcher would then place the treat in front of each child individually, let’s assume the marshmallow is chosen, saying: "You can have this one marshmallow any time you want it, but if you don't eat it and wait until I return, then you can have two."
The researcher then left the room for 15 minutes. About a third of the 600 children tested between 1968 and 1974 immediately ate the marshmallow. Another third waited (an average of three minutes), singing to themselves, approaching their marshmallow, sniffing it, then rearing back as if it were dangerous, then eating it.
The final third fidgeted, grimaced, danced in their seats, one girl even napped, but waited the seemingly endless 15 minutes until the researcher returned and they could have the two marshmallows, according to the Chicago Tribune.
Remember: It's never too early to teach kids about saving and self-control and you can especially teach by example and adhering to your own personal saving rules.
For more information on financial education, check out our newsletter for this month.