Build Financial Literacy and Wellness

Literacy is defined as competence or knowledge in a specified area while wellness is defined as the state of being in good health, especially as an actively pursued goal. Both of these terms are buzz words in education, across the board from elementary to college. Many feel they are one and the same, but how would your student rank in either financial literacy or financial wellness?

Why It Matters

Handling finances is a lifelong task.
Managing money is a learned behavior, just like learning to play volleyball or riding a bike. Similarly, the more those behaviors are performed, the more competent we become at doing them.
Starting early is beneficial.
The phrase “it’s never too early to start” applies to financial literacy. Exposure to simple banking transactions and terminology at an early age is a good foundation for higher level financial concepts later on.
Saving money now will pay off later.
The more money your student saves now means fewer loans that may need to be borrowed in college, if that is your student’s plan. Saving money also means you aren’t your student’s personal ATM.

What Your Student Can Do Now

Open a savings account.
If your student already has a savings account for depositing birthday, holiday gifts and possibly a paycheck, that’s a very good start. Be sure to point out the benefits of compound interest and the time value of money. Use the talking points included with this article to help you with the conversation.
Open a checking account.
Using a debit card for daily incidental purchases helps your student learn money management skills and is a good start to simple banking habits. Help your student realize that using the debit card is similar to exchanging cash with a vendor because it is immediately deducted from the account, so there should be money in it. However, caution your student about the ways debit cards can be skimmed at points of sale. Different types of electronic payments, such as Venmo or PayPal, and swipe-to-pay apps (Apple Pay, Android Pay, Google Wallet) can be used to combat debit card scams. Research them carefully and agree on using one or two together.
Create an online banking account.
Watching your money grow and monitoring how much is spent can be very satisfying. Additionally, monitoring banking accounts helps prevent potential identity theft. Even with the safeguards that financial institutions have in place, it’s beneficial to keep a watchful eye on banking activity.

What Your Student Can Do Later

Explore other types of savings accounts.
If your student’s savings account isn’t earning enough of a return or yield as compared to inflation, it might be worthwhile to explore some other products that can offer higher yields, such as online savings accounts or Certificates of Deposits. However, your student’s research should be done cautiously in order to avoid high-risk ventures.
Earn money.
Your student is at an ideal age to earn a paycheck from a part-time job or other jobs like babysitting or mowing lawns. Most employers who hire teenagers are used to scheduling them around various school activities. Even a few hours each week provides a paycheck, and prompts a conversation with you about how much of that should be saved and spent. A good starting ratio is 80/20 — 80% is deposited into savings and 20% can be spent at your student’s discretion.
Knowledge is power.
Check into any high school classes that offer financial education curriculum. In Iowa, financial literacy standards are included in Social Studies standards, but another course may offer more in-depth information for your student. If you don’t live in Iowa, does your state mandate financial literacy instruction?

What You Can Do

Go with your student.
Take your student to your preferred banking institution and offer a helping hand with setting up the savings and checking accounts. More than likely, your student will be grateful for your comforting presence to alleviate any anxiety.
Open a college savings account.
A college savings account, like Iowa’s College Savings Iowa 529 Plan, is a strong investment vehicle for your student’s education and training costs after high school. An account can be opened with as little as $25 and requires only ten minutes of your time. Your contributions are invested in various funds, which are then adjusted automatically as your student approaches the stage when they’ll be used.
Share your methods.
If you feel you have strong financial and banking skills, share them with your student. If not, then here’s your opportunity to learn alongside your student! If doing any online research, be sure the websites are reputable sources for information, like the ones we’ve included with this article.

Next Steps

Be sure to complete the survey questions at the end of this article to be entered into the 529 deposit giveaway!

Additional references, handouts and talking points are available in the right sidebar to use at your leisure. They may prove beneficial to reference now or after receiving future emails — we’ll leave it completely up to you. Use our emails like a recipe for a successful outcome — assemble the recommended ingredients and then follow accompanying directions to add flavor and depth.