Guest column: Parents need to educate children about personal finance

By SUSAN कोलेमन

Starting a conversation with your children about personal finance can be as difficult as talking about sex, drugs or alcohol. But with the right tools, parents can prepare their teens and young adults for a sound financial future.

It’s important for you to initiate discussions about money management and reinforce those messages over time, particularly since few students head off to college with any formal instruction in personal finance.

According to a study by the National Council on Economic Education, students entering college get a failing grade on personal finance knowledge, scoring 53 percent (F) on a basic 24-question quiz. There is a nationwide need to educate our children, and you can take the lead to impart these important life lessons at home.

The first step is to lead by example — model the financial behavior you want your son or daughter to exhibit. Seventy percent of students surveyed by The Hartford Financial Services Group said they learned the most about personal finance, money management and the value of saving from their parents. Apparently not everything goes in one ear and out the other.

You must approach conversations about personal finance in a systematic way and enhance your lessons by using resources like The Hartford’s Playbook for Life that explain personal finance concepts and share resources and tips in an easy-to-understand way. The program focuses on college students, but the information is also relevant at the high school level.

Instill core personal finance values by using real examples and providing age-appropriate ways for your children to deal with money. Introduce teens to setting goals and budgeting by helping them plan and save for things they want, like buying a dress or renting a limo for the senior prom.

Show them how to prioritize these goals and stay within their budget. It is also important to allow them to suffer some age-appropriate consequences for bad financial decisions. They will learn from their mistakes. Don’t be too quick to bail them out.

Prepare older children for college by helping them create a budget. Have them list anticipated expenses to help prevent unwise spending. Explain that they do not need a lot of money to create a budget and that it will provide a structured plan for attaining the things they need and want. Encourage them to pursue goals that will foster independence, such as saving for a car or apartment.

Have a frank conversation with your child about credit and debt. Emphasize that credit is money that must be paid back and interest may be charged. Explain the difference between good and bad debt and the paper trail it creates.

Review your credit report with your child. If your credit is unblemished, ask a relative with a less-than-perfect credit history for permission to share their report. Familiarize your son or daughter with the concept of a credit score and how a negative report can affect future goals like getting an apartment or securing a job.

Most likely this will be an eye-opening experience that will help set your child on the right path in establishing a good credit history and healthy financial future.

Remind your child that acquiring personal finance skills is a lifelong practice and learning experience. Continue to provide educational opportunities as life situations change.

Getting started may be difficult, but continuing your efforts does not have to be. More information and resources for personal finance and money management tips for parents and students can be found at www.playbook.thehartford. com.

Susan Coleman is the Ansley professor of finance at the University of Hartford and the educational adviser to The Hartford’s Playbook for Life. Susan Coleman is the Ansley professor of finance at the University of Hartford and the educational advis