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Last week, in the first of our of weekly posts on a lifetime of financial planning, we looked at how people can improve their lives by financial planning. Today we focus on children and how by giving them a financial education and instilling them with a culture of saving parents can lay the foundation for a successful financial life.
Financial education and awareness is vitally important to a secure, safe and successful future. Children today live in a far more complicated world than any previous generation and every parent should try to help provide them with the necessary tools to build a financially secure future.
The Securities and Exchange Commission in the US published ‘The SEC Study Regarding Financial Literacy Among Investors’ earlier this year. The report came to the conclusion that the majority of Americans do not know the difference between assets and earnings and in general, have a lack of financial awareness when it comes to money and finance. Areas of particular confusion included: compound interest, inflation, investment costs and investment fraud. The US is not alone in suffering this issue however. Many governments are coming to the realisation that there should be some kind of financial education in schools, but as with most things, progress in painfully slow. Meanwhile children finish school every year unprepared for the financial challenges that they will meet in life.
From quite an early age it is not only important to learn the different values of coins and notes, but also to be aware of what information is safe to share (online and elsewhere) and what transactions may present a risk. Later on in childhood, an understanding of how to budget, how savings and interest operate and especially the value of compound interest, can lay the foundations for a secure financial future.
Young children are capable of understanding the concept of having to wait in line for something they want. This is a useful foundation for teaching a child about saving; a discipline which will be of great value to them throughout their life. The earlier children learn to save and develop a savings habit, the better equipped they will be to provide for major purchases in their adult life.
As children grow older it becomes easier to reinforce the concept of saving. The mathematics of compound interest can quite easily be understood by early teenagers. Encouraging children to save a portion of their allowance or of what they earn becomes less of challenge once they can see the benefits. Realising that a little put aside each week can grow to allow them to purchase something of greater value is a great way to demonstrate the value of saving.
Older teenagers and young adults, with a foundation in financial education, will be much more open to making an effort to understand the more complicated issues of credit management, the difference between good debt and bad debt and the mechanics of insurance. By giving children a financial education, parents are providing them with the tools required to remain financially secure throughout their lives.
Throughout life, knowledge of finance and personal financial planning can help people to grow and protect their wealth. This leads to more choice in how they live their lives. The best way to ensure children can achieve this control over their lives in adulthood is to give them good financial education throughout their childhood and foster a habit of saving and personal responsibility when it comes to handling money. This will be invaluable to them throughout their entire life.
At Infinity, we strongly believe that good financial planning makes lives better and are committed to the cause of personal financial education for people of all ages. We believe that this opens up far more possibilities for people to live the life they choose.
If you would like help with your financial planning or any other saving, investment or insurance advice please get in touch for a fee free consultation from one of our professional advisers.
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