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Friday, March 1, 2013

Kids’ Money Made Simple: It’s All About Goals and a Budget

Amid all the noise about how to raise money-smart children, the two most important steps may be simply putting kids on a budget and having them write down a set of financial goals. These two measures correlate most highly with financial confidence and know-how among college freshmen, according to a study from Inceptia, a nonprofit that promotes financial education. No surprise: overall scores in the National Financial Aptitude Analysis were abysmally low. That’s been the case in just about every examination of youth financial acumen the last 15 years. And to a degree the kids’ confidence is misplaced. They don’t know as much as they think. (Imagine that!) Three-quarters of college freshman say they feel capable of managing their future income to achieve financial goals. Yet half or fewer rated themselves as good or excellent at setting a budget, managing credit cards and student loans, or understanding investing and compound interest. The new data may shed light on how to finally break through such barriers. (MORE: When Will the Federal Debt Cause a Greece-Like Crisis in the U.S.?) Students who said they have a budget were very likely to say they feel capable of handling their financial future; of achieving their financial goals; and feel in control of their financial situation. They also were likely to be saving on a regular basis. Sadly, only 51% say they have a budget. Students with specific financial goals like paying for college or buying a car were most likely to say that they track spending, save, compare loan rates before borrowing, have a budget, and check their credit report. Perhaps most striking, those who have written down their financial goals are way more likely to exhibit these positive money behaviors. For example, 22% of students with no financial goals say they track spending. That doubles to 44% among kids with financial goals in their head, and jumps by half again to 68% among kids with written goals. Similar leaps are found among those who save, compare rates, budget and check their credit report.

READ THE ORIGINAL POST AT business.time.com