Let’s face it, talking about money can be described as anything from difficult to downright embarrassing.
Fifty-six percent of Americans believe talking about finances with other is taboo, according to a study by OnePoll of 2,000 adults.
Debt, particularly, is considered so taboo that nearly three in five people have faked their money situation on social media to appear financially stable.
The worst part? We aren’t just talking about talking about money with strangers.
While 76% describe themselves as an “open book,” 63% said they would never discuss finances at the family dinner table.
When it comes to money, ignorance is never bliss. Whether it was a hefty credit card bill or an empty checking account when you were at the grocery store, we all remember that first big financial blunder. Did you know that 63% of Americans were living paycheck to paycheck, according to a monthly report from LendingClub?
As we are sitting here just after Financial Literacy Month, it’s time to start having better conversations about money with the next generation. Here are five conversation starters for you to consider:
- What is a budget? Building a budget can be difficult at any age, but it is essential for saving and to avoid overspending.
- How much should I have in an emergency fund? Setting aside money isn’t just for a rainy day. Saving is essential for when your car breaks down or the furnace explodes. You need to have 3 months’ salary set aside in an account that you don’t touch.
- What is compound interest? Einstein referred to compound interest as the “8th wonder of the world”. This is the basic concept of letting your money work for you, or if you have high debt, work against you. The chart below shows the difference of just saving money compared to what it looked like compounded at 5%.
- Are credit cards bad? Having credit is good. Overusing it and carrying debt is not so good. Credit cards are a great tool (and some have fringe benefits like cash back and frequent flyer mileage perks). It’s all about managing your credit cards so that you rule them (and they aren’t ruling you.) If you consistently just pay the minimum on your credit card bill, you are entering an endless nightmare.
- When (and how) should I start saving for retirement? As a twenty-something, retirement seems impossibly far away. But saving when you are young is critical. Also, it’s good to explain the power of an employer’s 401(k) plan (especially if your employer matches what you are setting aside.)
The truth is, talking about money is scary. According to the One Poll survey, respondents said they would rather watch a scary movie (30%), speak in front of a large audience (27%) or sit in two hours of traffic (28%) than think about their financial issues.
But a little education, and some great conversations will go a long way.
Link to chart data source: here