Top 5 Money Lessons for Older Kids

Last Updated Dec 10, 2010 9:37 AM EST


Part one in a series:
Smart money decisions that will lead to your kids' long-term savings success are rooted in five areas of understanding. With a little multi-media help (which I'll get to), most young adults should have no trouble grasping the basics of:
Knowing how each of these helps or hurts long-term savings is the key to achieving financial security, according to a Financial Literacy Center working paper that drew a lot of attention at the first conference of the Financial Literacy Research Consortium in Washington D.C.

According to authors Aileen Heinberg, Angela Hung, Arie Kapteyn, Annamaria Lusardi and Joanne Yoong, the chief failures of adults who test poorly in money matters come in these five areas. Only half of adults past age 50 can answer a simple question about interest rates and another about inflation; the success rate falls to a third when a question about diversification is added, according to the paper.

Financial knowledge is particularly low among young adults, aged 23 to 28, which is a period when long-term saving should begin. According to the paper, those who display little knowledge of these basics are more likely to end up in a costly mortgage and less likely to refinance their mortgage when interest rates drop; they are less likely to plan for retirement, and less likely to participate in the stock market and to choose mutual funds with lower fees -- behaviors that can set back wealth at retirement.

So there is a lot at stake. The good news is that these five concepts can be learned fairly quickly, the authors found. My next five posts will explore each (one at a time) with a video and a written narrative to help explain the concepts in simple, understandable terms. Both of these learning methods were found to effectively deliver the message to young people.

There is evidence to suggest that the narratives promote greater knowledge retention while the videos promote more immediate action and behavior change. So why not take a look at both? They are short and painless, and may be as useful for folks in their 30s, 40s and 50s as they are for teens and tweens. I'm going to ask my 21-year-old daughter to take a look, that's for sure.

Photo courtesy Flickr user rmgimages
Video and narratives to share with kids:
More on MoneyWatch:
  • Dan Kadlec

    Daniel J. Kadlec is an author and journalist whose work appears regularly in Time and Money magazines. He is the former editor of Time’s Generations section, which was written and edited for boomers. Kadlec came to Time from USA Today, where he was the creator and author of the daily column Street Talk, which anchored the newspaper's business coverage. He has co-written three books, including, most recently, With Purpose: Going from Success to Significance in Work and Life. He has won a New York Press Club award and a National Headliner Award for columns on the economy and investing.

Comments

CBSN Live

pop-out
Live Video

Market Data

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.

Market News

Stock Watchlist