Amid economic uncertainty and a looming recession, financial education for young people is more important than ever. That’s why it’s time to let your teen access your money and let them invest it.
I mean it.
As a caveat, I would like to clarify that you should not give your children unlimited and unfettered access to your finances – that would almost certainly not be a good idea.
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However, I strongly and sincerely encourage all parents to enable and enable their children to invest a controlled amount of their money in stocks, bonds, funds and other investment vehicles.
And you should do that soon, because new research and data suggest that young people are rapidly falling behind when it comes to critical financial literacy. In fact, a report released by the Milken Institute (opens in new tab) found that many high school students lack even basic financial knowledge and skills. Only according to that same report 12% of 15-year-old US students showed the highest proficiency in areas such as looking ahead to solve financial problems or making the kinds of financial decisions that may be relevant to them in the future.
Lack of financial education is a growing problem
This is a huge and growing problem, and if not addressed quickly, could lead a generation of young adults to make financial mistakes with serious, real-world consequences. This is a statistically based possibility, with research showing that Americans who lack financial education have insufficient household savings and pensions, poor credit scores and high student loan debt (opens in new tab). These consequences can prevent young people from renting an apartment, buying a house, taking out a loan or, in some cases, landing certain jobs.
However, this lack of financial literacy among young people is not due to a lack of desire to learn these skills. Another study from the London Institute of Banking and Finance (opens in new tab) found that a majority of young people said they want to learn about money between the ages of 11 and 14.
In the United States, governments are working on a solution to the problem. In recent years, a handful of states, including Florida, Michigan, Nebraska, Ohio and Rhode Island, have passed legislation mandating financial literacy in their schools. And while any state passing financial literacy legislation is an excellent step forward in combating the problem, only 21 of the 50 states have in-person finance courses in their high schools. (opens in new tab). Unfortunately, the problem seems to trump this solution.
Solving the problem of financial literacy cannot be the sole responsibility of the government or even the private sector. To improve financial literacy, both groups – as well as parents across the country – will have to do their part.
Platforms and technologies can help
Fortunately, there are tools and solutions that can help. In recent years, more than half a billion dollars have been invested in platforms (opens in new tab) offering savings and investment knowledge to children, young people and parents. Many of these new platforms and technologies allow young people with little to no knowledge to begin their path to financial literacy. Through risk-free and gamified experiences, young people can learn – at their own pace – the fundamentals of investing and other financial literacy topics that can help them build a brighter financial future.
Some tools even go a step further and provide parents with tools to raise financially literate individuals. Through solutions like Invstr Jr. (opens in new tab), adults can create custodial accounts for their teens, schedule monthly real money deposits, set up fees for achieving goals, and approve or reject investment proposals from their kids. These experiences are critical to boosting young people’s self-confidence as they learn how to become financially literate.
Financial education and literacy are springboards for any young person who wants to lay the foundations for a successful life. In the midst of economic uncertainty and a looming recession, it is more important than ever that young people gain confidence in their financial literacy.
With new legislation, investments and technology, together we can improve the financial literacy of young people around the world.
This article is written by and represents the views of our contributing advisor, not the Kiplinger editors. You can check advisor records with the SEC (opens in new tab) or with FINRA (opens in new tab).