By Joshua Contreras*
Oct 23, 2024, 12:51 PM EDT
Financial literacy is an essential skill for success, and parents in the United States play a critical role in their children’s financial education. Recent research from Wise shows that parents provide more than 100 financial tips a year to their children, yet this advice often fails to have the intended impact on young people.
The study also highlighted that, although more than 72% of parents want to improve their financial knowledge, many face challenges in complex areas, such as debt management or international finances.
Where is confidence and how to improve it?
In states such as California, Texas, New York and Florida, the results reflect a mixed picture: parents in Texas and New York report confidence levels around 70% when talking about basic financial topics, while in California and Florida that is Trust is lower, particularly in areas such as understanding debt – 25% in California and 24% in Florida – and credit scores, with only 15% in Florida.
This points to the importance of having accessible and specific resources for these communities. Most parents want training in these areas so they can provide stronger support to their children. This includes not only national issues, but also money management in an international context, which is particularly important for families sending remittances.
The role of remittances, transparency and financial education
Remittances are an important part of the lives of many Hispanic families in the United States, since sending money abroad represents fundamental support for their loved ones in their countries of origin.
However, the costs associated with these shipments usually include hidden charges that can considerably increase the final price of each shipment. A study commissioned by Wise and conducted by Capital Economics found that since 2018, foreign exchange transaction fees in the United States have increased by 41%, from $8.6 billion to $12.1 billion. According to the report, this represented a loss of $5.8 billion in hidden exchange fees for Americans.
These types of costs are not always obvious, and many parents express a lack of confidence when giving advice on international finance issues. In fact, the research revealed that only 14% of parents feel safe talking to their children about sending money abroad and 11% when explaining currency conversion.
Surprisingly, in states like Texas and New York, parental confidence in this issue is somewhat higher than the national average -21% and 17%, respectively-, which could be related to the high number of families that send remittances regularly and seek optimize your shipments. This shows that, despite low levels of trust, there is a latent interest in learning about global finance.
Given the critical role parents play in their children’s financial education, parents can implement some practical steps to make every piece of advice count:
Involve children in real financial decisions: A great way to encourage active listening is to involve young people in family financial decisions, such as creating a family budget or choosing a savings option.
Learn together about international finance: Taking advantage of your children’s natural curiosity to teach them about remittances, currency exchange, hidden charges, reading the fine print, and looking for providers who communicate their rates transparently are ways to empower them.
Encourage continuing education: The study shows that 79% of parents are open to using new tools to improve their financial knowledge, and this can include everything from online education platforms to free community courses. Leading by example is always very effective: every progress a parent makes in their own financial education is a valuable lesson they can pass on to their children.
As parents, we have a key role in the financial education of our children. As financial challenges increase, we can strengthen your skills and knowledge to better guide you. With tools and resources available, we not only improve financial management at home, but also give them a solid foundation to face the future.
By Joshua Contreras, Senior Policy and Campaigns Officer at Wise.
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