Monday, November 15th, 2010 | Author: mjward

Do young people on the verge of adulthood have money sense? The occasional story of a college student who commits suicide because of credit card debt suggests that they haven’t developed it. The horror stories about student credit card mismanagement are overblown. About three-fourths of college students handle credit sensibly and don’t run up huge balances on multiple cards. One study found that as college students got older, they became more capable of handling their financial affairs. This may be the result of growing maturity and learning by experience, in other words, practice makes perfect. Other research, however, found that younger college students had better financial practices and less debt than older ones.

Most emerging adults look to their parents for information on how to handle their finances. Those who feel they can talk with their parents about financial matters don’t feel as much stress as those who don’t think they can. Parents’ expectations also influence their children’s financial management and their sense of well-being.

Many parents, however, are not teaching their children what they need to know about money. Too often parents themselves lack knowledge and may get into difficulties over money and debt management. No research suggests that young people’s problems come from the poor example set by parents who can’t manage credit themselves. But I believe there is a connection. For instance, one couple bought a large house beyond their means because they thought it was a good investment. They refinanced the mortgage several times to meet their growing responsibilities. Their children expected and received the best in clothing and electronic toys. One of their sons was given an old but serviceable car by a relative. It was wrecked within a month. Another son trashed an apartment for which his father had cosigned. The bill was huge. The parents are now facing bankruptcy. The children still expect the best things without taking responsibility for earning them.

Learning occurs both through parents’ explicit teaching and by their example. When my children were at home, we rarely talked about financial matters with them. I can’t remember once telling them that we sometimes juggled bills, paying the minimum on the gas credit card for example so that we could meet the electric bill. Or that I had gone back to work because we needed the money to make ends meet. I believe that this lack of communication gave them false ideas as to how much we could help them as they tried to live on their own. It also failed to teach them how to manage their own money.

Another couple, who were self-employed and had fluctuating income considered financial matters part of dinner-time conversation. They might say, “We earned just enough money this month to pay salaries,” or “We netted ten thousand and can put some money away.” Before school, each child was told how much money was available for new clothes and was asked what he or she needed most. They also gave their children modest allowances, but provided them with many opportunities to earn money both around the house and in the family business. As they became older, they also learned about their parents’ investment strategies. Their mother says that, as adults, all the children are sensible about money. Here is an example of both explicit teaching and modeling of behavior.

What can be done to help young people become financially literate? There are a number of suggestions. Educate both parents and their children on money matters. For children, this can be part of their core education, starting from an early age. At the college level, students can be taught about such matters as debt management, saving, and planning for the future. There is little information on how successful educational efforts like these are. But maybe it’s worth a try.




Bowen, C. F. (2002). Financial knowledge of teens and their parents. Financial Counseling and Planning, 13(2), 93-102.

Jorgensen, B. L. (2008, June). The financial literacy of young adults. Family Focus, F11-F13.

Serido, J., Shim, S., Mishra, A., & Tang, C. (2010). Financial parenting, Financial coping behaviors, and well-being of emerging adults. Family Relations, 59, 453-464.

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