Based on responses I've received to recent columns, many readers are paying close attention to their children's financial futures.
I'm glad to hear that, and I appreciate their ideas, so I thought I'd share some of them with you today.
Several people wrote in about the Charles Schwab 2008 "Parents & Money Survey," which showed that only 34 percent of parents had taught their children how to balance a checkbook, and only 29 percent had taught them how credit-card interest and fees work.
A reader named Suzan sent me an e-mail detailing how she taught her own children.
"My children, as seniors in high school, each received a checking account and credit card," Suzan wrote. "They learned to balance their checkbook each month (they didn't get their allowance until they had balanced it), how to write checks, how to deduct bank charges and make deposits."
She talked to her children about the cost of bouncing checks and taught them to pay their credit-card balance in full each month.
"I helped each child figure out how much it would cost to carry a balance on their credit card, and they were shocked about the amount of money they would be giving away to the credit card company if they didn't pay in full each month," Suzan wrote. "My children worked during summers while they were in high school. ... They had a small amount of disposable income and learned to save some, donate some and use some."
She closed her e-mail with a request that I emphasize the importance of paying off credit-card balances in full each month.
"It's shocking to read of people with $54,000 of credit-card debt," she wrote.
That is shocking, Suzan, and I am happy to pass along your admonition.
Thanks, also, for sharing your plan for teaching children sound financial lessons. Doing so for your own kids took time and effort, but I'm guessing your high schoolers learned lessons that have served them well throughout their lives.
Another reader, identified as "Concerned Parent," posted an online response to the Schwab survey column. This parent wrote that schools and parents emphasize the importance of getting a good education and a great job but fail to adequately teach children how to manage their money.
"Most young people start off their adult lives living beyond their means because they were never taught about delayed gratification and consequences," this parent wrote. "Our society has made it so easy to borrow money that most of these young adults think that this is the way to the American dream.
"I think parents and the school system are doing these kids an injustice by not providing them with the very basic knowledge of money they will need to survive."
Agreed. As I wrote a couple of weeks ago, many schools are trying to rectify this shortcoming. But no matter what they do, the best money management education comes from parents who are willing to get their own financial houses in order, set a good example and take the time to teach their children at home.
On a related topic, a reader named Jo Ellen responded to a recent column about 529 college savings plans and, in particular, the Utah Educational Savings Plan.
As a reminder, 529 plans are set up by states to help people save money for college for their children and grandchildren or friends. The UESP does not require any minimum deposits or balances, and any adult can be an account owner.
Jo Ellen was concerned that I left out a detail about such plans.
"I don't have any children, so UESP 529 isn't of particular interest to me ... , but I think I've seen it advertised on TV recently, and there's a caveat at the end that the money is not insured by any federal or state entity," she wrote. "From that, it would seem to me that there is some risk in this plan. If that's the case, you should address it in your column."
Jo Ellen is correct. According to the www.uesp.org Web site, neither the state of Utah nor the UESP makes any guarantees about the rate of return or preservation of contributions to UESP accounts.
"Investments in UESP are not guaranteed by the State of Utah, the UESP, the Board of Regents, the Utah Higher Education Assistance Authority, the FDIC or any other government agency," the Web site says. "Account owners assume all the investment risks associated with these kinds of investments, including the risk of loss of principal."
Thanks, Jo Ellen, for pointing that out. As with any investment, you must do your research before putting money in the UESP or another 529 plan. A quick trip to the Web site should answer many of your questions.If you have a financial question, send it to [email protected] or to the Deseret News, P.O. Box 1257, Salt Lake City, UT 84110.
E-mail: [email protected]