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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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 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. 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 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. 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 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., 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.
-
Seven Surprising Reasons Retirees Are Going Back to WorkSure, money is a big reason to come out of retirement, but it's not the only reason retirees are doing it.
-
Dow Gains 617 Points as Rate Cuts Near: Stock Market TodayWednesday's economic data didn't shift Wall Street's expectations that the Fed is preparing for a rate cut at next week's meeting.
-
Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings, From a Financial PlannerHolding too much of one company's stock can put your financial future at risk. Here are four ways you can strategically unwind such positions without triggering a massive tax bill.
-
Beyond Banking: How Credit Unions Serve Their CommunitiesCredit unions differentiate themselves from traditional banks by operating as member-owned financial cooperatives focused on community support and service rather than shareholder profit.
-
Answers to Every Early Retiree's Questions This Year, From a Wealth AdviserFrom how to retire in a crazy market to how much to withdraw and how to spend without feeling guilty, a financial pro shares the advice he's given this year.
-
The Risks of Forced DST-to-UPREIT Conversions, From a Real Estate ExpertSome new Delaware statutory trust offerings are forcing investors into 721 UPREIT conversions at the end of the hold period, raising concerns about loss of control, limited liquidity, opaque valuations and unexpected tax liabilities.
-
I'm a Financial Adviser: You've Built Your Wealth, Now Make Sure Your Family Keeps ItThe Great Wealth Transfer is well underway, yet too many families aren't ready. Here's how to bridge the generation gap that could threaten your legacy.
-
Want to Advance on the Job? Showing Some Courtesy and Appreciation Could HelpTwo business professors share their insights about the impact of digital communication on the social skills of some in Gen Z and the importance of good manners on the job.
-
From Job Loss to Free Agent: A Financial Professional's Transition Playbook (and Pep Talk)The American workforce is in transition, and if you're among those affected, take heart. You have the skills, experience and smarts that companies need.
-
A Financial Planner's Top Five Items to Prioritize When Your Spouse Is IllDuring tough times, it's easy to overlook important financial details, but you'll be so much better off if you take care of these things right now.
