Pearls of Wisdom

Get a head start on financial literacy month

By Alfred Edmond, Jr., Bio
Black Enterprise Editor-in-Chief
March 21, 2007

April is National Financial Literacy Month! Since our weekly column is all about financial literacy, we’re going to begin celebrating early. You can join us by picking up the April 2007 issue of Black Enterprise (on newsstands now), which features Ariel Capital Management President Mellody Hobson, a leading champion of financial literacy, on the cover.

For the next six weeks, I will focus on tips and resources to help you improve your financial literacy. I also want you to take what you’ve learned and share it with others, especially our children.

Today, we’ll start with things we can do to increase the financial literacy of our kids:

1) Give them a weekly allowance, so they can get personal experience in managing money. Tie their allowance to your job’s pay periods. If they spend all their money, they don’t get more until you get paid. This will teach them to resist the urge to spend compulsively and help them to gain financial discipline.

2) Discuss financial matters as a family, so children understand that discussion and compromise are a part of financial decisions. Explain a) how bills come in, b) how and when they are paid, and c) why expenses (such as your rent or mortgage) are more important than others (the cable bill). Keeping your kids in the dark about family finances can result in unrealistic expectations or anxiety about money when they become adults.

3) Take the time to explain how credit works to your children when they see you using credit cards. Help them to understand that a credit card is not a piece of magic plastic that gets you things for free, but a way to borrow money to pay for goods and services–money that must be paid back with interest. Armed with this knowledge, your kids will be more able to resist the onslaught of credit card offers they’ll face as young adults (especially on college campuses) and be more responsible users of credit when they do get their first charge card.

A great resource for financial literacy for you and your kids is Banking on Our Future: A Program for Teaching You and Your Kids About Money (Beacon Press, $14.00) by John Bryant and Michael Levin. It’s a quick read that will help you and your children increase your understanding of financial issues and lessons together.

Alfred Edmond, Jr.’s column on Money Sense appears weekly at blackenterprise.com as well as on the Doug Banks Morning Show every Wednesday.

Copyright © 2007 Earl G. Graves, Ltd. All Rights Reserved.

Source: http://www.blackenterprise.com/printarticle.asp?id=2682