| Financial Education for Kids |
| By Credit Federal |
Published
07/15/2009
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Financial Tips
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Capital One Survey and Free Tips to Teach Kids about Credit
Parents should teach kids about credit at an early age to develop financial security and avoid bad credit habits. Below is a Capital One survey of High School seniors which reveals gender gaps in financial understanding:
Financial Education Classes Key to Preparing All Students for Post-High School Money Management Responsibilities
With high school graduation and summer just around the corner, many young adults will soon be experiencing newfound freedom and heading out into the world on their own. For many, this next chapter in life also means taking on the new financial responsibilities without the help of their parents. Capital One Financial Corporation recently surveyed high school seniors to see how prepared they are to manage finances on their own.
Although the survey data shows the majority of soon-to-be male graduates believe they are ready to take on these new challenges, the female students are less certain of their ability to manage their finances on their own.
According to the survey, two-thirds (65.4 percent) of the male students rated themselves as 'highly knowledgeable' about personal finance compared to less than half (49.2 percent) of the young women who participated in the survey. While the gender differences are surprising, these numbers also show a striking correlation between the students' confidence about their financial knowledge and whether or not they had participated in a financial education class, with 45 percent of the male students surveyed and 61 percent of the female students reporting that they have never taken a personal finance class.
Overall, one-third of the students (33.8 percent) said that they were either unsure or unprepared to manage their own banking and personal finances.
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"It's clear that financial education, or the lack of it, has an impact on students and the level of confidence they have in their ability to manage money on their own," said Diana Don, Director of Financial Education at Capital One. "Basic money-management skills are important building blocks for economic self-sufficiency and success and it's important that all students understand the fundamentals of personal finance when they graduate from high school."
Early practical experience with money and banking helps establish good habits
Real world experience also prepares seniors for the financial challenges and independence they will face upon graduation. Eighty percent of the high school seniors surveyed report that they have had a bank account for one to two years and that they are regularly checking their account balances. Most of those with checking accounts (73 percent) balance their checkbooks at least once each month and one quarter report that they check their bank account balances weekly for activity and errors. The vast majority (85 percent) of the students also said they at least periodically set money aside in savings. However, only half of the students surveyed (50.6 percent) use a budget to manage expenses and savings.
Parents are a primary resource
The majority of the student's participating in the Capital One survey (70 percent) reported that they, at least occasionally, look to their parents for advice about money management and personal finance. However, only 27 percent said that their parents are their primary resource for financial information.
For seniors who will soon be graduating and experiencing more financial freedom, Capital One offers the following tips for a healthy financial future:
- Establish financial goals – As a first step to financial freedom, consider and establish your own financial goals. Short-term goals could include setting aside money to cover everyday expenses or saving toward a vacation with friends. Long-term financial goals might include planning to repay student loans or saving to buy a new car.
- Develop a realistic personal budget that you can stick to – After graduation, many seniors may be responsible for a number of bills and personal expenses for the first time. Once you've established financial goals, create a budget of expenses you expect to incur. Gather recent receipts and be sure not to forget bills or things that may be automatically deducted from your bank account. Then determine your expected income. Determining your expenses and your income will show any gaps and will allow you to allocate your money properly, ensuring you are in control of your income and on track to meet your financial goals.
- Prepare for the unexpected – When creating a budget be sure to set aside money for emergency situations or unexpected fees.
- Balance your checkbook – (Free Electronic Checkbook Register - Click Here) It is one of the easiest ways to keep track of your finances and avoid unnecessary fees that will eat away at your budget.
- Simply pay attention – Thoroughly read all bills, contracts and fine print. This is one of the most important keys to financial responsibility. It's important to know your interest rates on all credit cards and loans. You should also check your bills closely for mistakes each month and report any erroneous charges immediately.
- Pay on time – Paying your bills on time is the most important step toward establishing a good credit history. If you anticipate that you will be late on a payment, contact your lender in advance to make them aware of your situation and see if there is any room for negotiation. Download our free bill payment reminder software.
- Be smart about credit – Look for ways to establish a good credit history (or rebuild credit) early on as your credit rating will play an important role down the road. If you choose to apply for a credit card or loan, be sure to read the fine print and understand any fees associated with the card. Also be sure to check your credit report at least once a year; regularly checking is one of the best ways to protect against identity theft and credit fraud. Consumers are eligible for one free credit report every year from each of the three major credit reporting agencies. Individuals can request their free credit report online at annualcreditreport.com or by calling 1-877-322-8228. Consumers should also be sure to fix credit report errors right away. You can do so by contacting each of the three major credit reporting bureaus – Equifax, TransUnion and Experian.
- Save! – While it might be challenging to put aside money in savings, this is an important habit to establish. No matter how little you put away, every little bit helps so don't wait to start saving. Put aside anything you can today. One way to do this is to have money automatically transferred to savings. This is one of the easiest ways to begin saving. Set up automatic transfers in regular increments to ensure that money goes directly to savings.
See how fast interest can accrue! Use our free savings calculator.
More Free Tips and Advice:
Teach Kids Money Management
Teach Children Value of Money
Teach Kids about Credit
Christmas Credit Card Kids
Financial Industry Promotes Child Protection
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