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.
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.
Sign up for Kiplinger’s Free E-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.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Kerim Derhalli is the founder and CEO of Invstr, 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.
-
How This Vanguard Emerging Markets Bond Fund Outperforms Its Peers
The Vanguard Emerging Markets Bond Fund took a cautious positioning at the start of the year, which has helped it beat the majority of its peers.
By Nellie S. Huang Published
-
New Rules are Shaking Up the Real Estate Market. Here's What You Need to Know
Buyers and sellers have more room to negotiate commissions, and that could reduce home prices over the long run.
By Sandra Block Published
-
Five Windows of Opportunity for Roth Conversions
When you convert a traditional IRA to a Roth IRA matters if you want to limit how much you pay in taxes.
By Aaron Argiso, CFP® Published
-
Four Social Security Myths Debunked
With so many headlines surrounding Social Security these days, what is fact and what is fiction? For instance, will the program really run out of money?
By Tony Drake, CFP®, Investment Advisor Representative Published
-
Can You List From Memory Everything That's in Your House?
That's what you'd have to do if something happened to destroy it all. It's important to make a record of your belongings so you can be reimbursed by insurance.
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS Published
-
When Should Retirees Consider a Donor-Advised Fund?
Charitable giving in retirement isn't right for everybody. But in certain situations, a tax-efficient donor-advised fund (DAF) may be well worth considering.
By Evan T. Beach, CFP®, AWMA® Published
-
Four Things to Know About Your Collectibles and Homeowners Insurance
If you're crazy about collectibles, and your hoard is growing in value, you may need to consider specialized insurance to protect your investment.
By Thomas Ruggie, ChFC®, CFP® Published
-
This Trust Strategy Can Reduce Your Taxes Big-Time
Upstream basis planning can help younger wealthy people pay less taxes on highly appreciated assets if they appoint an aging relative as a trust beneficiary.
By Rustin Diehl, JD, LLM Published
-
Three Major Estate Plan Mistakes to Avoid
A complete and up-to-date estate plan can help ease your loved ones' worries and make things easier for them after you pass.
By Jay Dorso Published
-
Which Type of Power of Attorney Is Right for You?
Durable or limited? How about springing or military? There are many more kinds of POAs than just medical or financial.
By Kelsey M. Simasko, Esq. Published