April is a key month for refocusing on finances. In addition to the IRS tax deadline, the U.S. Congress has designated April as Financial Literacy Month. Also, April 4-11, 2020 is Money Smart Week. Parents and guardians should take the opportunity to not only review their own finances, but to teach financial literacy to their children.

According to a 2019 survey by GoBankRates, 69 percent of Americans have less than $1,000 in savings, 17 percent have between $1,000 and $9,999 saved, 9 percent have between $10,00 and $49,000 and only 6 percent have more than $50,000 in savings.

Moreover, according to this study, women and middle-aged adults appear to have the most trouble saving money. Most adults seem to focus on boosting the retirement nest egg without first creating an emergency fund.

As an adult, there are some simple steps you can take to set aside more and improve your financial literacy:

1. Commit to change and make saving a priority. To determine how much you can set aside, add up the expenses you must pay and determine what nonessential expenses you can cut back on to make more room in your budget.
2. Automate savings. Either ask the human resources department at work to direct deposit a portion of your pay or set up an automatic transfer from your checking account into a savings account.
3. Assess your finances. This is a great opportunity to be honest about your relationship with money and to gauge your strengths and the areas that need improvement. Follow where the money goes to see how you spend and how much you spend. Document your spending, identify ways to reduce spending, establish a budget and stick to it.
4. Clear out the financial clutter. Getting your financial house organized is a great way to begin on your path toward financial wellness.
5. Get copies of your credit reports. Your credit reports can provide a snapshot of your overall financial situation. Reviewing them for accuracy can also help you to identify errors or fraudulent activity. You can get a free credit report annually from annualcreditreport.com. In addition to Equifax, Experian and Transunion, you should also be aware of Innovis and the National Consumer Telecomm & Utilities Exchange as two fast-rising credit reporting agencies.
6. Review your debt situation. Freedom from debt is an achievable goal for every family. The first step in regaining control is to take an honest look at your existing obligations. Pay down debt by focusing on either the highest interest rate account or the smallest balance.
7. Set SMART financial goals.

   S pecific: Pinpoint something you want to change.

   M easurable . You can measure or count a SMART goal.

   A chievable . Setting goals too high can lead to frustration.

   R ewarding . Reaching the goal should be a reward for your hard work.

   T rackable . Set milestones and schedules for your goals.

Teaching Financial Literacy to Your Children

Children these days feel pressure to spend money from commercials, celebrities and peers. Whether it’s the latest “it” doll, sneaker or gadget, messages on spending (and how much is reasonable) come from many sources. Get your children involved in the financial spring cleaning as a means of teaching them financial literacy. It is never too soon to start teaching them about money, savings and fiscal security.

• For grades K-2, you want to teach the children to understand currency and how money is earned. Many parents institute an allowance for chores or a lemonade stand as an early system of financial literacy. Your kids are bombarded with commercials for the things they just have to have. This is a great opportunity to teach them the difference between “needs” and “wants.” Get them a piggy bank or savings jar and encourage saving.
• For grades 3-5, encourage them to participate in career day and explore the concept of careers and income. Have them get involved in buying decisions that impact them, and teach them about setting a budget and working within it. If they have saved up for a skateboard, for example, have them sit with you while you research options online so they can see different pricing, features, coupons, etc., and let them work with you towards the best choice within a budget you set.
• For your middle or junior high students, start teaching them to evaluate the credibility and motivation behind marketing and advertising. Teach them to read reviews – especially negative reviews – to better form their choices. Explain budget categories: fixed (mortgage), variable (utilities) and discretionary (dinner out). Continue to promote savings, and make sure they understand that credit cards are not “free money.” This is a good time to also start to talk about fiscal safety and the risks of identity theft and account or online fraud. Your middle school student may want to start volunteering (as some school systems requires a certain number of hours for graduation), or babysitting as a means of making money, in addition to any allowance. This will help them understand the time value of money. When it comes time to spending it, work with them to understand smart shopping habits.
• For your high school student, check to see if their school curriculum includes financial literacy or accounting electives, and insist they take these courses. They will also be working towards college and career options. Many high school students work after school or over the summer. This will introduce them to FICA and Medicare withholdings and minimum wage laws. Have them set up a savings account (with you as a custodian) to help them create a savings and discretionary fund. At this age, the desire to get a driver’s license and a car will be a great motivator to set up that savings account. Consider setting up a monthly bill, perhaps for their cell phone data coverage, which they must pay to you (and on time) to get accustomed to the responsibility. Finally, in preparation for college or a career, begin working with them on a resume.
• For your college-bound students, know that once they are on campus, they will be inundated with credit card offers. If you’ve spent time on financial literacy education as they grow up, then you will have to trust that smart choices will be made. However, it never hurts to counsel your newly-adult students about being careful with credit cards and incurring debt. Tell them to look for low APRs and not just low introductory APRs. Suggest low credit limits as a means of curbing spending. Open an account with a bank that has a local branch on campus to avoid ATM fees. And, as always, work with them on a budget that they will, hopefully, stick to consistently.

You can learn more about practicing and teaching financial literacy by reviewing the resources available from the Federal Deposit Insurance Corporation Money Smart training modules, the Consumer Financial Protection Bureau’s “Your Money, Your Goals” training program or the Federal Financial Literacy and Education Commission’s website. Consumer Action, a nonprofit, has many publications on financial literacy, including one titled “Teens and Money” which includes sample budgets, needs vs. wants checklist and other useful tools.

For more information about this or other consumer issues, call the Montgomery County Office of Consumer Protection at (240) 777-3636 or visit montgomerycountymd.gov/OCP.