Hard economic times (like the ones we’re in) tend to remind us of how important understanding financial matters can be. After all, everyday transactions and financial decisions are what pave the way to larger financial events like being able to purchase a home or requiring the debt help offered by bankruptcy.

But, according to a recent report from Credit.com, fewer than half of the nation’s high school students were able to earn passing grades on a test of the basic tenets of financial literacy. And, according to another Credit.com story, many American parents are similarly befuddled by money matters.

What Your Kids Need to Know about Money

According to Credit.com, financial literacy lessons are best given and demonstrated in the home. Here are some finance basics to consider:

  • Debt starts early: Sources note that the average college student leaves school with about $4,000 in credit card debt and $20,000 in student loans – that’s a pretty big hole to be in, especially in this economy, when jobs are difficult to find. Further, reports indicate that bankruptcy filings are increasing most rapidly among citizens aged 18 and 25.
  • Money affects the whole family: It seems that as many as half of all college graduates are now moving in with their parents after leaving school because of an inability to find work or afford alternate housing. This can put a financial strain on parents, especially those who are already having difficulty making ends meet.
  • Talking is important: It’s unfortunate that money is often a taboo subject in this country, because discussing finance issues in an open, frank manner may be the best way to make sure everyone is on the same page financially. Credit.com reports that 85 percent of teenagers are worried about money – in many cases, speaking with teens about a household’s finances might relieve some of their stress.
  • It’s okay to be confused…if you seek help: One study suggests that a mere five percent of American parents were able to name the main factors that affect a person’s credit score, which means that if you’re not sure where to begin teaching your kids about money, you’re not alone. The good news is that there are plenty of educational resources available for free online, which means you and your family don’t have to be in the dark much longer.

Start Your Kids on a Path to Financial Success

If you don’t talk with your kids about money, now might be the time to start. Consider addressing some of the following:

  • How much things cost: If you’re paying all your kids’ expenses, they probably don’t understand the dollar value attached to each item.
  • How much people make: While you may not be comfortable revealing your salary to your children, you can discuss minimum wage, typical salaries for various professions, and how much time a person must spend working.
  • How credit cards work: Kids probably don’t ever see a credit card bill – only the magic of using plastic in a store. So teach them about interest rates and monthly payments.
  • Allowance: If you don’t already give your kids an allowance, it might be a good tool to teach them how to handle money.

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