10 Tips to Improving Your Financial Literacy

 LeeHeadShot4 In last week’s blogpost, I outlined the importance of becoming more financial literate.  This week I provide ten important tips you can use to improve your financial literacy skills and start your children off on the right track to becoming more fiscally responsible.

For Adults:

1. Take a financial management course. You can contact your bank or local community college to see if they offer such a course, or you can contact the American Consumer Credit Counselors for a free credit counseling session.

2. Learn common financial terms. Asset, depreciation, liquidation, equity are all basic terms you’ll come across in nearly every financial situation, but if you don’t know what these words mean or how they apply to your financial situation, you can’t make financial decisions that are right for you and your economic situation.

3. Read the small print! I can’t emphasize this enough. No matter how much pressure you get from slick talking salesmen, you should always take your time to read over ALL documents pertaining to your personal finances before you sign them. After all, you work hard for your money and no one’s going to look after your best interest except you.  Give yourself at least 24 hours to review any document before you sign on the dotted line to make doubly sure you’re making the right decision.

4. Diversify your finances. The saying “don’t put all your eggs in one basket” is true. Assuming you can afford to spread the wealth around, you should try to put your money in investment vehicles that stand to earn you money other than a simple savings account or a 401k plan with your employers. An IRA, stocks, bonds, mutual fund or exchange trade funds (ETF) are all investment vehicles that can provide a decent return on investment over the long haul.

5. Ask questions. If there’s something you don’t understand about a potential financial situation that could obligate you to a long-term financial commitment, ask questions – as many as it takes for you to fully understand the situation at hand. And if you don’t feel as if you’re getting the right answers from one person, ask to speak with the manager.

For Children:

1. Talk to them about money. Believe it or not, children learn how to manage money from watching their parents. Of course, if you’re not “penny wise” odds are your child may very well pick up some poor spending habits from you. The sooner your child learns the value of money, the sooner he/she begin to take a personal interest in his/her ersonal economy.

2. Give them an allowance. Most parent may not believe in giving their child an allowance, but an allowance gives them a  sense of ownership for “a job well done”. Moreover, they quickly learn that “money doesn’t grow on trees or comes from the ATM” each time they run out of their money.

3. Take them shopping with you. Let your child pay for groceries (small purchases, of course) and show them how to bargain shop. This way not only do they learn that you’re not an inexhaustible source of money, they also learn how to look for the best deals right along with you.

4. Give your child a piggy-bank. There’s nothing like the sound of a bunch of coins clanking in a glass jar or that pink plastic pig. Your child will have a sense of pride for all the money he/she saves up to purchase that special item on their wise list. As an alternative to a piggy-bank, you could also start a savings account for your child and let them make the deposits.  This way they learn about bankng, saving and investing early in life.

5. Play board games that involve money. Monopoly, Life, Payday. These traditional board games are not only fun to play, they also teaches your child about the world of finance. Every kid loves being the banker. Let them learn about financial management by playing with play money so that once they experience the real thing they can apply what they’ve learned in real life.

That’s my blogpost for this week.  Join the discussion and post your comments below.  And don’t forget to tune in next week where I’ll once again share more ways you can break the debt cycle and then go…beyond.

Zebert L. Brown is the author of Break the Debt Cycle in 3 Simple Steps and a 16 year Navy veteran with specialties in administrative management, career development and public relations.  Follow him on Facebook and Twitter.