by Dave Kutcher
Teach your children about finances and money management starting at early ages … it is crucial more than ever that they understand how to properly manage their financial life in a world where smart financial decisions are becoming more and more important in order for people not just to succeed financially and provide for their long term needs but even just for basic personal responsibility to maintain sustainability for themselves and their future families.
1. Foundation for Financial Stability:
•Early Start: Learning financial principles at a young age sets the foundation for making informed financial decisions throughout life.
•Knowledge of Basics: Understanding budgeting, saving, investing, and the importance of credit can lead to better financial health and stability. Start with some simple things such as how to balance a checkbook each month.
2. Avoiding Debt:
•Understanding Loans and Credit: With knowledge about how interest works and the implications of taking on debt, young people can avoid pitfalls like exorbitant credit card debt and student loans.
•Smart Borrowing: They learn to assess when and how much to borrow, if at all, fostering responsible borrowing habits. Using debt to manage financial needs is NOT a bad thing if done responsibly and with all stakeholders having their eyes wide open. And, inherent in the use of debt, recognizing there is additional risk to your financial plans if debt is part of an overall strategy – all the more reason to understanding how all the pieces of your personal financial world work together.
3. Building Wealth:
•Investing Early: Teaching the basics of investing and the power of compound interest can encourage young people to start investing early, thereby building significant wealth over time. It is typically an eye-opening experience for someone to see the power of long-term compounding and how waiting too long to start planning for future years, such as retirement, can make it almost impossible to save enough if there isn’t tie for earnings to help you build the ultimate nest egg.
•Entrepreneurship: Financial literacy can inspire and equip young individuals to create and manage their own businesses effectively. We have lots of widget makers out there who are extremely talented at their craft. Often at some point in their life looking to have their own business and be their own boss. But making widgets and selling them successfully in the world around you is not as easy as it sounds and requires a minimal basic understanding of how business works, how it differs from personal finances and how each needs to work together to make things work for you, the widget guru. You can make the best widget in the world but if you cannot run your business in a financially sound way, you will fail and lose your ability to bring your widget to market and maintain a thriving business that will serve your personal financial house.
4. Economic Awareness:
•Understanding Economic Systems: Knowledge about how the economy works, including inflation, taxes, and government policies, enables young people to make informed voting choices and understand economic news. Show a teenage a paystub from work and walk through the various deductions on your pay stub. Watch the eyes widen when they see what is deducted from your weekly pay for items such as Federal income tax withholding, social security and medicare taxes, health insurance premium sharing with employer, retirement plan contributions, etc.
•Risk Management: They learn about risk and how to manage it through diversification, insurance, and other financial products.
5. Promotes Independence:
•Self-Sufficiency: Financial literacy fosters independence, reducing reliance on parents or the state for financial support.
•Decision Making: Equipped with financial knowledge, individuals can make decisions that align with their personal and financial goals.
6. Reduces Stress and Increases Well-being:
•Security and Confidence: Financially knowledgeable individuals are more likely to feel secure and confident in their financial choices, reducing anxiety related to money.
•Well-being: Financial security impacts overall well-being, contributing to better health and life satisfaction.
7. Empowers Societal Equality:
•Level Playing Field: Financial literacy can bridge gaps created by socio-economic disparities, giving everyone a fair chance to succeed economically.
•Community Impact: As individuals become financially secure, they can contribute to community development and economic growth.
Implementation in Education:
•School Curriculum: Integrating financial literacy into school curriculums can ensure all children receive this essential education. The key here from my perspective is making sure those who are teaching this information must be finically literate themselves and that is a concern with younger and younger individuals in teaching positions who have come from generation that hasn’t taken the time to teach the teachers what they need to know. I don’t want a teacher who is maxxed out on debt, doesn’t understand their own retirement plan and is unable to see the value in planning for unforeseen financial circumstances teaching the next generation the same.
•Practical Applications: Providing real-world simulations, projects, and interactive tools to make learning engaging and practical.
•Parental Involvement: Encouraging parents to discuss finances openly and provide real-life examples to reinforce learning. If you have the knowledge to teach good financial practice to your children, take the bull by the horns and make this a priority in your home. Think of ways to incorporate the things they need to learn into their other curriculum as well. Don’t count on a 23-year-old recent grad student who has little financial preparedness themselves be the sole source of what your children might be learning in this regard.
In conclusion, providing financial literacy education to young generations is a critical investment in their future, paving the way for a secure, prosperous, and independent life.
My name is David A. Kutcher, a retired Marine Corp Captain. My business partner in the lower 48 is Richard C. Scott, CLU, LUTCF. For nearly 40 years we have been helping folks with their personal retirement decisions. You can catch us on the radio every Saturday morning, “Retirement in the Last Frontier”, 8:30-9:30 on AM 650, Keni Radio and on Tuesday mornings, KFQD News Talk Radio AM 750 and FM 103.7. Frontier Retirement; 10928 Eagle River Road; Eagle River, AK 99577, (907) 795-7452.
