Investing in Our Youth’s Financial Literacy

April 28, 2022

In today’s world, we face higher debt levels than ever before. That is especially true for our younger generations. The irony is that most young people don’t receive formal (or even informal) education surrounding financial literacy. Those who come from low-income families are more likely to be financially illiterate as they typically don’t have access to financial information and tools such as how to start a savings account. Low-income families in African American communities are more likely to be “unbanked,” facing often insurmountable challenges in accessing banking services. It’s up to us as community leaders to make changes that ensure all of our younger generations, especially those of color, have equal access to financial resources in order to become more financially literate as an adult. While each April is National Financial Literacy Month which presents a great opportunity to invest in our youth by sharing financial literacy resources, we can also start those conversations any time of the year.

Why Financial Literacy Should Start With Our Youth

If children aren’t taught how to handle money, how can they be expected to become financially responsible adults? Financially illiterate youth are more susceptible to fall into financial traps that involve debt. Once debt starts to accrue, it can be incredibly difficult to get out of a financial crisis and back on track to building long-term wealth.. That’s why financial literacy should be taught at a young age, so that everyone has the knowledge and skills to make financially sound decisions to help themselves and to support future generations. Here are some of the reasons why financial literacy is so important for our youth:

Financial Illiteracy Can Encourage Irresponsibility

The world as we know it today is slowly moving towards more consumer spending on a regular basis all while inflation rates break recent records. From May 2021 to March 2022, U.S. inflation reached the highest rates in over a decade with consumers spending even more than they did two years ago. With this change comes each individual’s need for more money as basic living necessities continue to take up more space in the budget. According to a study from the Center for Financial Services Innovation, 54% of Americans ages 18 to 25 say that their expenses are equal to or greater than their overall income. This is an alarming statistic that goes back to the root problem of a lack of financial literacy among young people paired with a skyrocketing cost of living. Without this foundational knowledge, it can be easier for people to spend money that they may not even have, pushing them to make irresponsible decisions when it comes to their financial situations.

Understanding Financial Planning Prepares Youth for Emergencies

Life happens – and having a back-up plan and an emergency fund ready to go is crucial in overcoming unforeseen problems. Being taught the fundamentals of finances and saving money at a young age can prepare our younger generations for emergency financial situations. Young people managing their first adult responsibilities need to be able to plan for expenses that could have ripple effects on their financial stability. Maybe a car broke down and needs to be repaired or an accident occured requiring a hospital visit occurred – we never know when these situations might happen, so being prepared is key. Providing the necessary tools for preparing for financial emergencies will prepare younger generations for tackling these situations without potentially putting themselves further into debt.

Being Money Savvy Empowers Our Youth

It’s always been said that knowledge is power – that certainly proves true when it comes to financial knowledge. Adults today who are financially troubled or who lack ways to discuss finances with their families pass along these same poor money management skills to future generations. This lack of knowledge can create a dangerous cycle of debt for any young person and can extend through generations. It’s up to parents to empower their children by educating them on smart money management tips and financial literacy.

Youth Financial Literacy Organizations

Robert F. Smith supports a number of organizations that encourage financial literacy for future generations. The Goalsetter app has made it a priority to support the next generation of Black and Latinx Americans through their savings and investment education software. This tool provides underserved young people h with a mechanism to pursue financial freedom. In the spring of 2022, Smith announced a generous stock gift to the students, educators and staff members at Eagle Academies for Young Men which they could use to educate themselves on the power of financial investment through Goalsetter.

Financial literacy is critical but often overlooked. Providing young people with the tools & resources to understand their finances sets them up for future success and economic mobility. Learn how @GoalsetterCo prepares future generations to participate in the digital economy.
— Robert F. Smith (@RFS_Vista) May 16, 2022

Another organization that encourages young people to learn more about financial literacy is Girls Who Invest. There is a significant gender gap when it comes to women in the asset management industry and the organization’s founder Seema R. Hingorani set out to close this division. The non-profit organization offers training programs and has exclusive partnerships with asset management firms to help young women get a place in the finance industry.

Learn more about the work these two organizations do to promote financial literacy by following Girls Who Invest and Goalsetter on Twitter.