By Thomas Kostigen
Generation Wealth, the book, film, and museum exhibition, is about the desire to achieve wealth — at any costs. There is a more personal and likely more effective approach to financial success than desire: investing young.
Next-generation planning is often neglected to the detriment of heirs and their advisers. Indeed, as many as 90% of next-generation investors plan to leave their parents’ advisers. Meanwhile, 70% next-generation wealth is squandered within a generation.
Money advice for young people —while they are still very young— can be a solution to wealth preservation. And financial advisers can play a key role as educators.
Financial knowledge, which is sorely lacking in the United States (the US ranks just 14th as a country in the world in terms of financial literacy) often falls flat even when it is taught. Researchers found that unless finance is made specific to a person’s circumstances, it doesn’t sink in. This is where advisers can play a huge role: by explaining the value of saving and investing, advisers can foster financial planning programs that are meaningful for individuals, families, and society as a whole. Moreover, this early adopter framework can also secure their roles in their students/clients’ futures. In other words, it’s a great retention program.
As children as young as seven years old have been found to have a basic concept of money, financial education is more important today than ever. With in-app purchases embedded in children’s games, and more direct commercial relationships available to kids via social media, it’s wise for parents if not outsiders to begin talking about money with kids while they are still young.
There are lots of resources available online to begin teaching kids money habits at a young age. There are even complete kids’ financial education curriculum programs available to teach young people about financial planning. Most financial literacy programs begin with lessons about spending, then graduate to budgeting before scaling up to earning, saving, and ultimately, investing.
“Just 23% of youth in a recent survey by Money Confident Kids responded that they talk to their parents frequently about money,” according to the Financial Educators Council. That dynamic needs to change before real financial literacy can begin.
To be sure, education needs to begin at home because, for sure, kids are not being taught about money and finance in school. Less than 20% of high school students in the US are required to take a personal finance course. At the same time, more than 75% of high school students believe personal finance should be required study. And that may be because a broad survey of high school graduates revealed that 84% of the group said they were not properly prepared to handle money issues. It should be no wonder then that the majority of American households do not have enough funds available to cover even a $500 emergency expense. Financial planning has not been a life requirement.
Like athletes, investors have the best chance for success if they start young. Financial lessons may redefine the next generation of wealth. The desire for prosperity may welcomingly get lost in the comfort of financial security. And that could be a boon for advisers and individuals alike.
Thomas Kostigen is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
