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 kids access to your money and let them start investing.
As a caveat, I want to make it clear that you shouldn’t give your children unlimited and unrestricted access to your finances – that’s almost certainly not a good idea.
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However, I strongly and strongly encourage all parents to empower and allow their children to invest a controlled amount of money in stocks, bonds, funds and other investment vehicles.
And you should do so soon, because new research and data show young people are rapidly falling behind as it relates to key financial literacy skills. In fact, a report published by the Milken Institute (opens in a new tab) found that many high school students lack even basic financial knowledge and skills. According to the same report, only twelfth% of 15-year-olds in the United States have demonstrated the highest levels of proficiency in areas such as looking ahead to solving financial problems or making the types of financial decisions that may be appropriate for them. Future.
Lack of financial education is a growing problem
This is a huge and growing problem, and if it’s not addressed quickly, it could lead to a generation of young adults making financial mistakes that have serious real-world consequences. This is a statistically proven possibility, with research showing that Americans who lack financial education don’t have enough savings for household and retirement, poor credit scores, and high student loan debt. (opens in a new tab). These consequences can prevent young people from renting an apartment, buying a home, securing a loan or, in some cases, finding certain jobs.
However, the lack of financial literacy among young people is not due to a lack of desire to learn these skills. Another survey from the London Institute of Banking and Finance (opens in a new tab) found that the majority of young people said they wanted 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 past few years, several states, including Florida, Michigan, Nebraska, Ohio, and Rhode Island, have passed laws mandating financial literacy education in their schools. And while every state passing a financial literacy law is a great step forward in solving the problem, only 21 of the 50 states have middle school personal finance course requirements. their school (opens in a new tab). Unfortunately, the problem seems to go beyond this solution.
Fixing the financial literacy problem cannot be the responsibility of government or even private industry alone. To improve financial literacy, both groups – as well as parents across the country – will need to step up and do their part.
Platforms and technology can help
Thankfully, tools and solutions exist to help. In recent years, more than half a billion dollars have been invested in platforms (opens in a new tab) provides savings and investment literacy for children, young adults and parents. With many of these new platforms and technologies, young people can start the path to financial literacy with little or no knowledge. Through risk-free and gamified experiences, young people can learn – at their own pace – investment basics and financial literacy topics can help them move towards a better financial future.
Some tools go even a step further, providing parents with the tools to raise financially savvy individuals. Through solutions like Invstr Jr. (opens in a new tab), adults can create custodial accounts for their teens, schedule real monthly deposits, set grants to accomplish goals, and approve or decline investment proposals from their children . These experiences are important in boosting the confidence of young people as they learn to become financially savvy.
Financial education and financial literacy are the stepping stones for any young person looking to build the foundation for a successful life. Amid economic uncertainty and a looming recession, it’s more important than ever for young people to be confident in their financial literacy.
Together with new legislation, investment and technology, we can improve the financial literacy of young people everywhere.
This article was written by and represents the views of our contributing advisors, not the Kiplinger editorial team. You can check the advisor record with the SEC (opens in a new tab) or with FINRA (opens in a new tab).