How did you learn to manage money and understand the value of investing? Did your parents relay to you what they knew about money or did you read books on budgeting and investing in figuring it out yourself? The reality is that many of us did learn through trial and error.
An alarming statistic is that in the US only 14 states require a class in personal finance and 20 states require a class in economics to graduate from high school. If you aren’t teaching your family about money management and investing, they aren’t getting it. One of the ways families maintain wealth and pass it to future generations is through financial literacy. Financial education will preserve the wealth of the current generation and onward if you adopt it as part of your family’s legacy to educate versus becoming a statistic.
If you don’t consider yourself an expert in financial literacy, we would like to help take some pressure off of you. Understanding how money works and learning to resist the temptation of spending more than one earns should start at an early age and be reinforced through the teen and college years.
Even children at a young age understand their purse or wallet being empty and not being able to buy a treat when they go to the store. Not giving in when they have no money and purchasing it anyway doesn’t teach them anything. Even in a crowded store with your child throwing a temper tantrum, some lessons will last their entire life, if you take the time to teach them.
Teaching Financial Literacy to Your Children
How do you start the conversation with children? By asking them what they think investing is, naming types of investments, and what they want to learn about money and investing. Teaching concepts and terms related to investing, its importance, and managing their money is part of the conversation. If you think about it, this is very similar to how we start the discussion with adults after our initial meeting; what do you know about investing, why is it important to you, and how should we invest so that you can live a more fulfilled life?
Focusing on the importance of math, giving the next generation a look into the world of investing starts with basic Finance 101; the bank accounts for spending and saving, brokerage accounts, and the ‘why’ behind investing. Children don’t always equate that an investment can be anything from a house to a brokerage account being used to save for retirement. If we give our children the basics of money management, we help them develop the best strategy to preserve their wealth, the wealth of their children, and so on. There’s no better strategy to preserve wealth than financial education for this and the next generation.