It’s Time to Let Your Teen Manage Your Family’s Money

The lack of financial education among young people in the U.S. is setting them up for high levels of debt and poor credit scores. Youth-oriented financial literacy platforms can help.

A smiling teenage girl holds quite a lot of cash.
(Image credit: Getty Images)

Amid economic uncertainty and a looming recession, financial education for young people is more important than ever. That’s why it’s time to give your teen access to your money and let them start investing it.

I’m serious.

As a caveat, I’d like to clarify that you should not give your children unlimited and unfettered access to your finances – that would almost certainly not be a great idea.

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However, I am strongly and earnestly encouraging all parents to empower and enable their children to invest a controlled amount of their money in equities, bonds, funds and other investment vehicles.

And you should do so soon, because new research and data suggest young people are quickly falling behind as it relates to critical financial literacy skills. In fact, a report released by the Milken Institute (opens in new tab) found that many high school students lack even basic financial knowledge and skills. According to that same report, only 12% of 15-year-old students in the U.S. demonstrated the highest proficiency in areas such as looking ahead to solve financial problems or making the type of financial decisions that may be relevant for them in the future.

Lack of Financial Education Is a Growing Problem

This is a massive and growing problem, and if it is not addressed quickly, it could result in a generation of young adults who make financial mistakes that have grave, real-world consequences. This is a statistically backed possibility, with research showing that Americans who lack financial education have inadequate household and retirement savings, poor credit scores and high student loan debt (opens in new tab). These consequences could prevent young people from renting an apartment, buying a home, securing a loan or, in some cases, landing certain jobs.

This lack of financial literacy among young people is not for a lack of desire to learn these skills, though. Another survey from the London Institute of Banking and Finance (opens in new tab) found that a majority of young people said they would like to start learning about money between the ages of 11 and 14.

In the United States, governments are working to solve the problem. Over the last several years, a handful of states, including Florida, Michigan, Nebraska, Ohio and Rhode Island, have passed legislation that mandates financial literacy education in their schools. And while every state that passes financial literacy legislation is an excellent step forward in combating the problem, only 21 out of 50 states have personal finance coursework requirements in their high schools (opens in new tab). Unfortunately, the problem seems to be outpacing this solution.

Remedying the problem of financial literacy cannot be the responsibility of the government or even of private industry alone. In order to improve financial literacy, both groups – as well as parents across the country – will need to step up and do their part.

Platforms and Technologies Can Help

Thankfully, there are tools and solutions that exist to help. In recent years, more than half a billion dollars has been invested in platforms (opens in new tab) offering savings and investment knowledge to children, young people and parents. With many of these new platforms and technologies, young people can start on their path to financial literacy with little to no knowledge at all. Through risk-free and gamified experiences, young people can learn – at their own pace – the basics of investing and other financial literacy topics that can help them build toward a better financial future.

Some tools even go a step further, providing parents with tools to raise financially literate individuals. Through solutions like Invstr Jr. (opens in new tab), adults can create custodial accounts for their teens, schedule monthly deposits of real money, set allowances for completing goals and approve or decline investment proposals from their children. These experiences are critical in boosting the confidence of young people as they learn how to become financially literate.

Financial education and literacy are stepping stones for any young person looking to build the foundations for a successful life. Amid economic uncertainty and a looming recession, it’s more important than ever for young people to become confident in their financial knowledge.

With new legislation, investment and technology, together, we can improve the financial literacy of young people everywhere. 

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).

Kerim Derhalli
Founder and CEO, Invstr

Kerim Derhalli is the founder and CEO of Invstr (opens in new tab), an award-winning financial education and investment app. Invstr’s mission is to empower everyone to take charge of their financial future. Invstr has been downloaded over 1,000,000 times by users in over 220 countries. Prior to Invstr, Derhalli built a 30-year career building, growing and managing multibillion-dollar businesses at leading financial institutions all around the world.