While the Great Recession of 2008-09 is clearly in the rear view mirror, there were many lessons that we all learned, sometimes painfully. It is always amusing to me when I hear persons say “this caused the recession” or “that caused the recession.” Most observers agree that there were many things that led to this period of economic turmoil.
One phenomenon that is not frequently discussed is the increasing lack of financial literacy in our general population. We need more parents to make financial literacy a priority before their children leave home.
Topics such as budgeting, responsible credit card usage, and the importance of saving should be “drilled” into our young persons. I personally have seen instances where persons simply had no idea how their 401K was allocated, how much they owed on their homes, and had absolutely no savings other than perhaps the aforementioned 401K. When the “perfect storm” hit in 2008, these persons were ill prepared for the economic hard times that were suddenly upon them.
What to do about all of this? Start by spending time with your child or grandchild and teaching that child about the venerable notion that a savings account is not some old-fashioned and outdated relic. Those who read this space each month will recall that several months ago, I referred to my first mentor in banking, Mr. Billy Cole, who told me “you should always have at least three months’ salary in your savings account,” though Billy was quick to add “I prefer six months because I can sleep better at night!”
Let’s all make a commitment to show appreciation for that oft-forgotten art that is called “saving.” Parents and grandparents must make a commitment to teach children the basics of saving and budgeting. Teaching savings lessons beginning at a young age will benefit a child’s future.
Recent studies indicate that a child with a college savings account is seven times more likely to attend college, regardless of the account balance. Lessons can be as simple as “don’t spend every dollar you earn or are given” but, instead, work hard to “set aside a portion for savings and giving to worthy causes.”
Begin by talking with a child about the importance of a bank account. You may see some ears perk up when you give this example: by saving just $10 a week, in three years one has saved $1,560 (plus interest). Bump the savings up to $25 a week and in three years your child will have saved $3,900 (plus interest).
And when money is invested in a local bank, the money saved serves a double purpose for you and the community because savings are loaned back to people and businesses in the community, thus allowing the community to grow and prosper. Just as good habits are important in many other areas of life, so are good habits necessary for financial fitness.
That is why MidWestOne is making a large commitment to National Teach Children to Save Day on April 11, 2014. We will be sending our bankers into classrooms next week to teach kids the importance of good savings habits. I plan to go to Lemme Elementary School in Iowa City and cannot wait to share some of the things I’ve learned with a large group of attentive youngsters. Last year, we reached more than 2,200 kids in elementary schools throughout our footprint and this year we hope to reach even more. Bankers from all over the U.S. will be doing the same things in their local communities. This is important, folks!
Please commit yourself to teaching at least one child good savings habits in the year ahead. While we cannot control if and when the next economic storm will hit, we can take steps to be prepared.