By Mariah Phillips at 2U.com
Stereotypes abound about lazy millennials living in their parents’ basements. But skyrocketing student loan debts are actually a significant reason why young people feel financially insecure.
Americans owe $1.4 trillion on student loans in 2018, up from just $241 billion in 2003. Years after they graduate from college, millennials have increasing difficulty in their already debt-ridden states securing loans to buy homes.
Unfortunately, students may not be aware of the implications of the choices they make about loans at age 18, according to Christie Novak, an accounting professor who discussed the issue in a recent piece about millennial home ownership from the online MBA program for Syracuse University.
“I think when you’re going to school, it’s tough to think that far ahead,” she said. “Once you’re out of school, you’ve realized that you’ve taken on all this debt.”
Young adults are finding themselves, through no fault of their own, saddled with debt without the financial literacy to navigate the tricky waters–and prospective students start the process fresh each year. Although we live in a capitalist, class-based society, school systems do not teach basic finances, and the topic often goes undiscussed at home. This leaves recent college grads in a bind.
Although parents can’t control the economy, there are some things they can do to expose children to financial realities that will better prepare them for adulthood. Here are five tips to discuss financial planning with your kids.
Experts suggest breaking down economic education into age-appropriate increments over time. Toddlers can learn about the concept of money, older children can learn about earning and saving through small jobs, and teenagers can learn about more complicated concepts like credit. This provides a foundation of understanding and context for students considering student loans.
Be Open About Family Finances
You can expose children to money realities by being open about family finances. Invite them to join in the bill-paying process, opening envelopes or reading bills, which will demonstrate the concept of monthly utilities and budgets.
Provide Context For Jobs
As children get older, you can help them find ways to earn money (lemonade stands, babysitting, summer jobs, etc.). Discuss ways they can spend earnings and how to save for a long-term purchase like an electronic device or special clothing item.
Make It Interesting
Elementary school students will have difficulty with a formal lecture on financial planning. Instead, create games that mimic financial concepts or use the Monopoly board game as a teaching tool.
When your children are teenagers, discuss the importance of building a financial history and how student debt can impact opportunities for other loans, whether for homes or business ventures requiring capital or commercial real estate.
Ideally, change will soon come on a macro level so American students are not required to decide between amassing enormous debt and pursuing higher education. In the meantime, parents can be open and deliberate about financial concepts to prepare children for future realities.