From where did you learn most of your life skills? How did you learn to brush your teeth, read, write, or drive a car? Personally, I learned these things from my parents and teachers. Here is a topic that affects just about every facet of our lives and many parents have limited knowledge of it and it is often not covered in school: finances! Finances are consistently listed as one of the top reasons for divorce, and money is one of the biggest causes of stress for Americans(1). Additionally, it is my belief that financial illiteracy is one of the reasons for the widening inequality gap. If finances are so essential and money issues cause so many problems, why don't we have a greater emphasis on financial education? Why do we have kids graduating from high school who can do Calculus but don't know what an IRA is or how credit scores work? To answer this question, we have to take a look back in time.
Once upon a time, not that long ago, you could walk out of high school, get a good paying job with benefits, work for that company for 30+ years, get a healthy pension and Social Security benefits, and live happily ever after. Large credit card balances, 401k plans, and IRAs were non-existent. Then something changed. Organizations no longer wanted the long-term obligations of pension plans so the responsibility of saving for retirement was shifted to the employee. 401k’s slowly replaced pension plans, college became increasingly expensive, and the world (particularly our financial systems) has become very complicated. We now have countless tax rules and ways to get ourselves in financial trouble. Fifty years ago, many of our parents and grandparents did not need to learn about retirement strategies, student loans, or tax strategies. Since many did not acquire this knowledge, they could not pass it on to us. Additionally, our schools have been slow to adopt adequate financial education.
I am passionate about this subject for two reasons. First, as a financial advisor, I have seen how having your financial house in order makes life a little less tough. It won't fix all of our problems but it can help your marriage, reduce stress and increase peace of mind. Second, we need a financial awakening in this country. According to a recent survey(2), 42% of Baby Boomers have nothing saved for retirement! Who is going to support these individuals as they age and can no longer work? Who will pay for their medical care and nursing home stays? You got it - the taxpayer. This simply must change.
Enough about the problem; let’s talk about the solution. Like so many other areas, it starts at home. The best thing you can do is take charge of you and your family's financial education. Join a finance-related course like Financial Peace University, read a book on personal finances, or meet with a financial advisor. A good financial advisor will not only provide advice but education as well. I spend most of my time with new clients educating them on budgeting, investments, retirement strategies, etc.
Most importantly, don't keep this new found knowledge to yourself. Pass it on to your kids and grandkids. Have your kids earn an allowance and help them learn to spend it wisely. If they spend it all on silly things, don't shell out more. The journey to financial freedom is not easy, but it is very rewarding and it starts with financial education. I hope this article will help you on your journey to financial freedom!
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Written by: Brandon Carter