The Generational Legacy and Benefits of Financial Literacy

In Financial Literacy Month, it is more imperative than ever to recognize the importance of financial literacy for youth. Youth Financial Literacy Day transformed into Financial Literacy Month by a Senate resolution in 2003. But the resources continue to be focused on youth to reap the societal benefits.

How would your children or grandchildren handle inheriting $1 Million next month? Would they know how to manage and invest it properly? Between understanding credit, mortgages, and investments there are a lot of moving parts to financial wellbeing whether you inherit a million dollars or not. Being able to navigate all those moving parts is an important piece of learning to navigate the world. So, being able to teach children and grandchildren about financial literacy, based on your own life experiences, is important preparation to maintain their family legacy. As Forbes writes, financial literacy “equips you with the knowledge to make informed decisions, leading to greater monetary stability, less stress, and a higher quality of life.”

Particularly as the youth of today will have to face a tricky economy, youth financial literacy is only growing in relevance, yet still isn’t often taught in schools. Educating younger generations on financial prowess not only allows them to be financially literate and prepared for when they come into their own funds, but also empowers them as people and ensures that they will not squander a given inheritance. The benefits of financial literacy extend beyond though.

Financial literacy prepares youth for the now:

It can be useful to teach financial literacy sooner rather than later in order to build confidence and practice with finances. A child who has early exposure to financial literacy will have a stronger foundation once they need to apply financial tactics on their own. They will both feel more comfortable in what they’re doing and they may better understand the gravity of certain financial decisions. Even through high school, the youth of today are facing financial decisions, so teaching them how to effectively manage money, build credit, and even invest, for example, may give them a leg up once they move on to post-grad plans and managing inheritances.

Financial literacy prepares youth for the future:

As Livewell notes, a lack of financial knowledge can lead young adults into a spiral of financial instability and debt: something no one wants for themselves, their children, or grandchildren. Thus, establishing good financial habits effectively prepares young adults for their future. Teaching about interest rates, responsible borrowing, and retirement funds is an integral step in setting them up for a successful future and successful managing of family legacy funds. When looking to leave an inheritance to one’s grandchildren, it affords peace of mind to know your funds will be managed safely and smartly and that your given inheritance will contribute to a successful future. Of course, while youth financial literacy helps the youth in their individual futures, it also aids the entire future economy, encouraging a more stable economy. This can allow community economies to grow and potentially reduce dependence on governmental assistance.

Financial literacy empowers their decision-making:

Teaching financial literacy accomplishes the obvious in imbuing youth with financial knowledge and skill, but it serves an important, secondary purpose. Beyond mere ability, making sure someone is financially literate allows them greater autonomy and confidence in their lives. Being able to navigate one’s inheritance as well as the greater financial world is a skill that affords independenceand self-empowerment. With the many moving parts of financial literacy, it can easily be overwhelming, and without sufficient financial knowledge, one may be forced to rely on others to navigate for them, which can have a plethora of negative consequences. Being able to effectively navigate one’s own finances therefore allows one to feel confident in their own abilities and not feel pressured to rely on outside sources. It also ensures that any legacy funds will be properly managed according to your wishes.

If your children or grandchildren inherited that $1 Million next month, do you think they’d know what to do with it and would they be a productive citizen and financial steward? Starting youth off on the right foot in the financial world can go a long way in their own financial success, their confidence, the greater stability of the economy, and their ability to secure family legacy. Educate and communicate with them now so they will thrive –with or without our help.

Read our next article, Financial Considerations for Your Grandchildren (coming soon), for ways to help educate them, or just ask for our help.