Let me start this article with some shocking statistics from LIMRA (Life Insurance Market Research Association). According to the study, this will be the situation of the 25 year olds of today when they reach their retirement age of 60:
1% – will be rich
4% – will be financially independent
5% – will still need to work
27% – will be dead
63% – will be broke
If the above does not rouse you to action, I don’t know what will. When I show this during my FQ (Financial Intelligence Quotient) talks, most of the people in the audience say they would rather be in the 27% than the 63%!
I’m sure some of you feel the same. So if you were somehow startled by those figures and moved to action, now is a good time because April is Financial Literacy Month. I’m not sure whether we have this officially in the Philippines but I know that in the US April was declared as Financial Literacy for Youth Month under Pres. Bush in 2003. Later on Pres. Obama, seeing the most terrible financial crisis, declared April as National Financial Literacy Month in 2010. In other words it’s not limited to the youth but for all.
So with or without any official declaration in our country I think it’s wise to follow suit in observing April as Financial Literacy month. Heck! We follow US in celebrating Valentine’s Day, Mother’s Day, Father’s Day, Secretary’s Day, Halloween, etc. The only difference is that during all these occasions, the malls and retailers heighten our awareness. Drop by the store and you will be reminded to buy something for the occasion. As early as September malls play Christmas carols! But we can’t expect the malls to remind us that April is Financial Literacy Month, can we? That’s not good for their business.
But it is every parent’s business to make Financial Literacy a part of his/her child’s education. (Again, remember the statistics and ask yourself, “Where do I want my child to end up in those stats?”)
I heard from a friend that financial literacy lessons will be integrated in Math and Values subjects starting Grade 2 this school year 2012-2013. This is good news. I’m happy that our education system is adding relevance to the subjects. However, we should realize that the best teachers for financial literacy are still the parents. It’s because this has more to do with values than technical skills and values are best learned at home. In fact, values are caught not taught.
Teaching financial literacy also has a lot of nuances that has to do with culture and family traditions. Take for instance the question, “Should I ask my child to shoulder his college education?” In the US a lot of the students pay for their college education and that is why they already have loans even before they find a job. In the Philippines it is every parent’s pride, and most of the time perceived as an obligation, to send his child to college. In fact, the more affluent ones who really value education go further and fund their children’s graduate studies.
In the recent visit of Suze Orman to our country, one college student asked a question about his stock investments. When Suze interviewed him onstage she asked him where his investment money came from and he said from his savings from allowance and cash gifts. Suze was very surprised to find out that he was not yet working and told him that at his age now that’s what he should be preoccupied with. Had she known this nuance about our culture (i.e. sending our children to college for free), maybe she would have commended him for investing his savings and cash gifts in the stock market instead of buying gizmos or spending it on gimmicks.
I’m not saying that we should not allow our children to work during college. In fact, I think it’s a good idea to incorporate in the education system opportunities wherein our children will experience being a waiter (it’s a good way to feel how it is to be on the service providing side of the fence), a tour guide (so they learn more about our culture and hopefully develop more pride in being a Filipino) and other blue collar jobs. Or making them work during summer. What I want to point out is that the differences in culture should be taken into consideration in teaching money values.
On top of the cultural nuances, we also have family traditions and values. During one dinner some of my husband’s friends were surprised to find out that financing our sons’ master’s degrees was not something we promise to them, “Huh, sige na, kaya nyo naman yon di ba?” My husband and I both agree that we commit to fund their college education, wherever they want to take it, within the allotted time frame (overstaying in college is discouraged). But we are not saying that we will never help them at all should they decide to take up further studies in the future and need our help. It is just that we believe their free college education is already enough to launch them into a successful life.
When our oldest son graduated from college some relatives were telling him not to work right away but just relax and have fun for some time. I think he deserves a great vacation. He was a great student all his life. And I think he’s doing that now, he just came back from a fun vacation in Boracay where I think almost all the graduates went to recently. He’s also going to a few Asian countries on a quasi-adventure trip with a friend. But he knows that after he graduates, no more allowance from Papa and Mama. In his words before he graduated, “Oh no, my financial umbilical cord will soon be cut!”
This was our agreement. I think it excites him even if it scares him a bit. It makes him very conscious with his spending and I’m sure this will deter any move to defer earning his own money. But of course, we’re still Filipino parents so Pinoy style – he continues to enjoy free board and lodging with us, even after he starts earning. Just one condition – he has to go once he decides to get married or reaches the age of 35 and still single. But that’s another story.
I shared with you a glimpse of our family money values to get you started in thinking of your own. Bring in financial discussion over dinner. In my FQ talks I always emphasize that the first step in teaching our children money matters is to know our own money values.
Remember you are your children’s best finance teachers. If you haven’t started yet, would you care to start this April the Financial Literacy Month?
Good luck and be rich!
P.S. To get you started, you may want to read the other articles I’ve written about the subject of Financial Literacy. Here they are:
And of course Chapter 6: Money Matters of the book.