Parents spend many years reviewing their children’s report cards. A recent study essentially turned the tables on this, with young adults reviewing their parents’ performances, particularly in relation to financial matters. The findings weren’t good: Gen Z (people between the ages of 12 and 27) is the least financially secure generation, and a third of them say their parents didn’t set a good example for them.
There’s a reason parents are underperforming, and a reason young people need to feel more confident about their financial future.
Why many parents set poor examples
Before you blame your parents for not helping you become more financially savvy, put yourself in their shoes. You may complain that your school never taught you much about money, but your parents probably received even less financial education.
According to a 2023 Edward Jones survey, 80% of respondents said they were never taught money skills in school. So, like most people their age, your parents were doing the best they could.
Many of them ended up deep in debt or facing other financial problems, often without realizing how dangerous overusing a credit card is and how high-interest debt can add up over time.
How parents can set good examples today
Here’s what your parents could have done if they knew more about financial matters and whatnot you you can do with your children now or whenever you have them:
- Talk about money often – your financial goals, your financial challenges, how you’re overcoming those challenges, your smartest and dumbest financial moves, etc.
- Show them your household budget and help them learn how much things cost.
- Let them watch you shop in stores, online, anywhere; talk about how you’re choosing to spend your money and share when you decide to postpone or cancel a planned purchase.
- Show them how to have fun without spending a lot of money, such as walking, playing board games, reading, playing sports with friends, etc.
- At the right time, start discussing the power of long-term investing in stocks. Show them how they can become millionaires one day if they save and invest.
- If you’re an investor (and most of us should be since Social Security won’t be enough to provide a comfortable retirement), let them see you investing. Talk about the investments you choose and why you choose them. Maybe we talk about companies of interest together. Eventually, help them start investing as well.
Basically, you want them to grow up fully aware of financial matters and how to manage money sensibly.
Meet the millionaires next door.These Americans made millions out of nothing.
Why young people have a lot to be sure of
Finally, regardless of how much they may or may not have learned from their parents, young people shouldn’t necessarily despair about their financial futures, because those futures can be quite bright. Why? Simply because young people have a lot of something that is vital to building wealth, something that most of us have a lot less of – and that is time.
See the table below, which shows how money can grow over time. It assumes average annual growth of 8%, although no one knows exactly how fast the market will grow over a given period. In the past, it has averaged close to 10% over many decades.
Source: Calculations by author.
Young people need to understand that once they earn money, if they can regularly invest meaningful amounts, they can accumulate significant sums that can help them achieve all kinds of goals, such as a reliable car, a fully furnished house paid, to support a family. , enjoying a comfortable retirement, and so on.
You – and the young people you know – would do well to take some time to learn more about investing. And then teach others.
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